Agenda
1 November 2022
Post Office Board Agenda
POL00458418
POL00458418
Finsbury Dials, 20 Finsbury
Street, London EC2Y 9AQ.
POL Board Meeting-01/11/22
Ben Tidswell (Chairman) Brian Gaunt (NED) Rachel Scarrabelotti Zdravko Mladenov (Group Chief Digital
(Company Secretary) Information Officer)
© Nick Read (CEO) © Carla Stent (NED) ‘© Tim McInnes (Strategy and I ¢ Simon Recaldin (Historical Matters
Transformation Director) Director)
@ Saf Ismail (NED) © Alisdair Cameron ‘Liam Carroll (Procurement _I e Fintan Canavan (Inquiry Director)
(CFO) Director)
Tom Cooper (NED) © Lisa Harrington (NED) I * Max Jacobi (Finance ‘© Ben Foat (Group General Counsel)
Director Retail)
© Zarin Patel (SID) © Elliot Jacobs (NED) ‘© Navin Batra (Strategic ‘© Andrew Goddard (Head of Payments)
Financial Planning &
Analysis Director)
* Martin Kearsley (Product
Portfolio Director - Banking,
Payments and Transactional
Products)
Apologies: None
1. Welcome and Conflicts of Interest Noting Chairman
2. Minutes Approval Chairman/ CoSec 10:00 — 10:05 hrs
(i) 27 September 2022
Matters Arising Noting
3. Committee reports (verbal) Noting Chairman neha «Cada he
Historical Remediation Committee lisa Harrington ° ete is
¢ Nominations Committee
4. CEO Report Noting & Input Nick Read 10:15 — 10:45 hrs
5. Finance Noting & Input Al Cameron/ Max
Financial Performance Report Jacobi/ Navin Batra I 10:45 - 11:15 hrs
© FY22/23 Budget Review (Verbal Update)
6. Three Year Strategic Plan Noting & Input Al Cameron/ Tim
McInnes/ Navin 14:15 - 11:25 hrs
Batra/
7. Revised Change Spend Noting & Discussion Al Cameron/ Tim 11:25 - 11:55 hrs
McInnes/
8. SPMP Deepdive including NBIT Roll-out Noting & Discussion I ZdravkoMladenov I 11:55 - 12:25 hrs
9. Revised HMU/ Inquiry spend Noting & Discussion Ben Foat / Simon 12:25 - 12:55 hrs
Recaldin/ Fintan
Canavan
Break 12:55 — 13:10 hrs
10. Historical Matters Ben Foat/Simon 13:10 - 13:40 hrs
« HMU Update Noting Recaldin
© Inquiry Update Noting Fintan Canavan
1. Approval Requests 13:40 — 14:10 hrs
STRICTLY CONFIDENTIAL
1 of 134
POL-BSFF-138-0000004
POL00458418
POL00458418
Agenda
Post Office Board Agenda
* SPMP Device Funding Drawdown Approval Zdravko Mladenov
* External Auditor’s proposed fees and terms Approval cameron
© FY21/22 ARA Publication and Filing pprova eneon
Approval Al Cameron
© Postal Museum Loans Approval Liam Carrol/
@ Procurement Andrew Goddard/
Martin Kearsley
12. Noting Papers with no Presentation
© Health and Safety Report Noting
Cl) Dashboard
13. Noting and Governance Items 14:10 - 14:25 hrs
¢ Incoming Chair - Independence Approval
© Sealings Report Approval
¢ Future Meeting Dates Nae
© Forward Agenda orn
14. Any Other Business
Feedback on papers Noting
15. Date of next scheduled meeting: Noting Chairman
Board Meeting — 6 December 2022 13:00 - 17:30
hrs
STRICTLY CONFIDENTIAL
2 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0001
Tab 2.1 Minutes from 27 September 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
POL00458418
POL00458418
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 27
SEPTEMBER 2022 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 13:00 PM
Present: Tim Parker Chairman (TP)
Carla Stent Non-Executive Director (CS)
Zarin Patel Senior Independent Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Brian Gaunt Non-Executive Director (BG)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Rachel Scarrabelotti Company Secretary (RS)
Roshana Arasaratnam UKGI - Observer (RA)
Owen Woodley Group Chief Commercial Officer (OW)
Max Jacobi Finance Director — Retail (MJ)
Navin Batra Strategic Financial Planning & Analysis Director (NB)
Tim McInnes Strategy and Transformation Director (TM)
Neill O'Sullivan Managing Director - Parcels and Mails (NO)
Zdravko Mladenov Group Chief Digital and Information Officer (ZM)
Ben Foat Group General Counsel (BF)
Simon Recaldin Historical Matters Director (SR)
Fintan Canavan Inquiry Director (FC)
Kate Gallafent KC Blackstone Chambers — Inquiry Counsel (KG)
Jeff Smyth Enterprise Cloud & Data Transformation Director (JS)
Apologies: Tom Cooper Non-Executive Director (TC)
Action
1. Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Chairman called for the
Directors to disclose any conflicts of interest. The Directors declared that they had no
conflicts of interest in the matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the Company's Articles of
Association.
The Board acknowledged the attendance of RA as an observer at the meeting. As an
observer, the Board was aware that all contributions made by RA to meeting were
observations only, and did not constitute advice, recommendations, directions or
instructions. The Board confirmed that it would take due care not to be unduly influenced
solely by a contribution made by RA and that it would reach its conclusion based on a
balanced and diligent assessment of all the facts available to it.
2. Minutes and Matters Arising
TABLED and NOTED were draft Minutes from the Board Meetings of 12 July 2022, 13 July
2022 and 18 August 2022. Subject to the incorporation of comments provided by LH on
the draft Minutes of 12 and 13 July 2022, and the comments of SI on the draft Minutes of
18 August 2022, the Board RESOLVED that the Minutes of the Meetings held on 12 July
Page 1 of 21
STRICTLY CONFIDENTIAL
POL Board Meeting-01/11/22
3 of 13
POL-BSFF-138-0000004_0002
Tab 2.1 Minutes from 2:
4 of 134
POL00458418
POL00458418
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
2022, 13 July 2022 and 18 August 2022 be APPROVED as a correct record of those
Meetings and be signed by the Chair.
The Board NOTED the action log and status of the actions shown. ZP queried whether the
action log could be condensed to remove items that were semi-concluded or where there
was no prospect of change in the near future. The Chair agreed with this and requested
that a shorter list be compiled and provided for the next Board Meeting.
TABLED and NOTED was a paper, ‘ATM Banking Strategy Programme: Lessons Learnt and
AEI Assurance Review’.
The Chair passed to NR and asked NR whether he wished to make any comments on the
paper. NR advised that a Central Operations Director had been recruited who was due to
join in October to assist the Retail team to manage all change that effected the network;
there was confidence that this appointment would help. There had also been issues at the
beginning of the year as to whether JS or ZM should be involved in which projects; this
issue was now resolved and ZM was doing a great job. NR advised the Board that whilst
some issues remained, that the executive team were making progress.
EJ contributed that he had had a conversation with TM following the 12 July 2022 Board
Meeting and that he thought the revised paper tabled was much more accurate.
The Chair drew the Board's attention to the key themes and learnings that came out of the
review. CS advised that she hoped we could take the lessons from this exercise, as it felt in
some ways the project was a repetition of what had happened when change had been
implemented previously. NR took the point however reiterated the new appointee who
would be looking at the capacity of the network to absorb change at any one time. LH
shared her experience from other organisations, who used a change counter, and advised
that change projects in the network needed to be mapped out ahead of the rollout of
NBIT. ACTION ZP agreed with this and requested that whether it was in 3- or 6-months’ M Roberts/
time, that M Roberts attend the Board to speak about the specifics of the NBIT roll-out in zM
the network, to ensure that we were ahead of this. NR agreed with this approach.
SI asked NR whether, on the findings of the review, we were going to communicate
anything to the network. NR replied that he thought the November Postmaster
conference could be the time to discuss this and that he knew there needed to be a degree
of humility in the communication.
Sl asked whether management had followed through with all the branches we had
switched over to tablets, as SI still had some Postmaster’ s contacting SI to say that there
were issues. SI asked whether EJ had heard of issues. EJ replied that he had not. SI
emphasised that delays in implementation did not help Postmasters at all and that
Postmasters needed to be appropriately sighted on upcoming changes in order to allow
implementation in good time. The Chair agreed with this and advised that there needed
to be tight control over the number of change projects affecting the network in flight at
any one time.
The Chair noted a theme that had emerged from the review was that when we were
rolling things out, we needed to be sure that we were receiving the right feedback, to
ensure that we are refining the implementation as required. Sometimes we assumed that
things were going better than what they were, and this was the value of having EJ and SI
on the Board to provide their views on implementation. EJ advised that EJ and SI had been
Page 2 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL-BSFF-138-0000004_0003
Tab 2.1 Minutes from 2:
3.1
3.2
ptember 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
consulted ahead of the rollout of the ATMS however their recommendations had not been
addressed, ZP commented that the Postmaster Director should have been involved in the
pre-consultation also. EJ agreed with this in principle however pointed out that the
Postmaster Director had only just joined at this time.
The Chair advised that an issue for some companies was the empowering of more junior
people. People in this band were tasked with starting a program and found themselves
between their manager and people who were telling them that what was proposed was
not going to work. We needed to empower more junior people to speak up — this was
very important as it was typically middle management who often knew the specifics. The
Chair advised that he was unsure as to whether this was an issue at the Company.
SI advised that issues remained with some tablets, in that Postmaster’s still needed to click
on install certificates every time; this should have been resolved. NR replied that this
could be a great case for the Central Operations Director when she joined next month;
part of the problem was that we needed to remind ourselves to behave as a retailer. BG
shared that from his experience of working in a retail environment that a strong
operational team was key.
Committee Reports (verbal)
Remuneration Committee
The Chair invited LH to provide an update on the work of the Remuneration Committee.
LH advised:
¢ Proposed rules in respect of the STIP and LTIP had been prepared which detailed
eligibility and defined terms such as ‘good leaver’. Rules around the STIP and LTIP
had not been in place at the Company historically;
¢ Plans were underway to communicate the Future Pay Framework in respect of the
2022/23 STIP, 2022-25 LTIP, and 2021-24 LTIP. Malus and clawback were to be
introduced into the schemes;
¢ Inrelation to some payments issued under the 21/22 STIP questions had arisen as
to whether the correct approvals process had been followed. This issue was being
considered with urgency.
Historical Remediation Committee
The Chair asked BT to provide an update on the work of the Historical Remediation
Committee.
BT advised that the HMU and Inquiry update papers included in the Board pack were quite
comprehensive, however drew the Board’s attention to the following items:
¢ Late applications (being late applicants to the HSS scheme) had been sitting in
abeyance for some time. Although not announced as yet, funding for this had
been secured. As soon as the funding was announced, we would need to
administer the applications quickly. The issue of late applications and the delay
around these had become a significant issue at the Inquiry;
* On OHC, the issue there was finding the right alternate option to HSF. The HRC
were trying to find an option that would be supported by all stakeholders. We had
Page 3 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL00458418
POL00458418
2.1
POL-BSFF-138-0000004_0004
Tab 2.1 Minutes from 2:
6 of 134
ptember 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
had a lot of good news on OHC however the HRC needed to tackle what OHC
administration would look like in the next few months;
¢ Inrelation to detriment, the 14 workstreams remained ongoing. On the paused
payments issue, there had been quite a debate as to whether we should be
pausing payments for Postmaster’s who are repaying debts. It was a very difficult
issue as we didn’t have the detail as yet in respect of the underlying issues and we
needed to establish if/ how this related to detriment. However, the HMU team
were starting to bring some of the categories together so we could move forward,
including on the funding front;
* Good progress had been made in respect of HSS; although we may not hit the 95%
stretch target for offers issued by the end of October.
The Chair called for questions. In relation to pause payments, AC requested that the Board
set a time limit for when this matter would need to be returned to the Board for decision,
delays could result in us being subjected to heavy criticism. There would simply come a
point when we needed to act, and this was likely to be pre-Christmas. BT agreed with this
and advised that the HRC was prompting the team to work hard on this issue, and that his
expectation was that the HRC should receive additional information in October. BT shared
his view that he did not think that we had sufficient information at present to make a
decision. AC replied that he had some scepticism about whether the information would
help us to move forward — even if we worked through all the individual pieces successfully
the equation would still not add up — so the only way we could resolve this was by
speaking to Postmasters. BT noted that there were 2 groups of Postmasters here; the first
group was Postmasters who were paying monies back now. If we went back to go the Cl
the Company was criticised for taking the re-payments without having undertaken
investigations. The second group of Postmasters were those who had paid back monies
historically and we didn’t know why. CS observed that this potentially sounded like
another whole scheme. BT queried whether the underlying issue was shortfalls and if so
whether we were really going to run another scheme for shortfalls. NR noted that the
potential quantum was land that the issue went back over 25 years; D Bickerton
had shared his view with an analogy, if you reversed into a parked car then you would put
a note with your details under the windscreen wiper — this is what we should be doing
here. CS queried how many times we needed to go and ask the same population if there
was an issue. BT replied that paused payments had a slightly different complexion, in that
they spread horizontally across the business; we had been constructing vertically. If we
could get the vertical pillars constructed that would give us a universe as currently, we did
not have visibility. AC contributed that the fact that we were unfunded for a potential
liability did not mean that the liability did not exist; we could only play the we don’t have
funding card for so long. AC shared his view that he thought that the HRC should bring the
matter back to the Board for either the next Board Meeting in November or the final
Board in December before the end of the year.
The Chair reminded the Board that their job was to articulate the problem — we needed to
explain to government what the issue was. The second component was that as an
organisation we needed to take a stance quite broadly that we wanted to compensate
Postmasters for everything that has been unfairly and wrongfully done to them. The
problem was that we were being criticised for non-payment of compensation. Given that
the government was providing the funding we needed to make sure that we make it clear
where responsibility sits. Despite best efforts to resolve historical matters the Company
had to hear the continual theme of Postmasters not receiving compensation in good time.
Page 4 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL00458418
POL00458418
2.1
POL-BSFF-138-0000004_0005
Tab 2.1 Minutes from 2:
3.3
3.4
POL00458418
POL00458418
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
We have one shareholder however we have a single brand, and we have to be careful that
that brand is not being unfairly discounted for decisions that we cannot take. BT pointed
out here however that BEIS would say that we had not asked them for funding as yet. BT
noted that the approach could be that we moved to investigate, as opposed to running
another process to administer this. AC agreed that this was where we needed a decision.
The Chair observed that we would reach a stage where a limit has to be declared. In an
environment where there was an expectation on us to meet any claim we needed to signal
when the limit was reached. NR advised that he thought that we are arriving towards this
point.
Nominations Committee
The Chairman provided an update on the work of the Nominations Committee, advising
that the Nominations Committee had noted that the Chairman was due to step down from
the Board come 30 September 2022, and that the Committee had resolved to recommend
to the Board the appointment of BT as Interim Chair of the Board for the period from 1
October until 30 November 2022.
Noting that BT did not participate in the decision, the Board RESOLVED that:
(i) BT be and is hereby appointed as Interim Chairman of the Board of Directors
for the period 1 October until 30 November 2022; and
(i) I The Company Secretary be instructed to file form TMO1 with the Registrar of
Companies and update the Company’s Register of Directors to reflect the
Chairman stepping down from the Board 30 September 2022.
The Chairman further advised that the Committee had resolved to recommend to the
Board a number of appointments to the Board’s committees.
Noting that the Directors did not vote on their corresponding proposed appointments, the
Board RESOLVED that:
(i) LH be appointed as Interim Chair of the Nominations Committee for the period
1 October until 30 November 2022;
BG be appointed as a member of the Remuneration Committee;
EJ be appointed as a member of the Audit, Risk and Compliance Committee;
and
(iv) Sl be appointed as a member of the Nominations Committee.
The Chairman also advised that the Committee had noted the external appointments of
CS, LH, EJ and SI to other boards.
In addition to the above the Chairman advised that an update had been provided to the
Committee on the recruitment of 3 new NEDs. There was an obvious diversity issue
looming here with 3 women leaving the Board and it was very important in the
recruitment to maintain a degree of diversity around the Board table.
The Chairman called for questions. There were no questions.
Audit, Risk and Compliance Committee
Page 5 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22 Tol
POL-BSFF-138-0000004_0006
Tab 2.1 Minutes from 2:
ptember 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
The Chairman requested CS to update the Board on the work of the Audit, Risk and
Compliance Committee.
CS advised:
© ARC had met earlier in the day. An interesting meeting had ensued: with limited
funding there were a number of risks that we had to accept. The ARC would
review the final 3YP and assess where that left the Company on risks, then write to
the shareholder to advise them of the position. The shareholder was consistently
i IRRELEVANT H
© On Postmaster losses the numbers were starting to creep up;
The corporate insurance renewal levels had been approved, and in terms of cover
we were holding level for cyber;
In terms of the RMPP issue, the team had progressed the matter to a point where
we could sign a MOU that was still within the financial envelope provided by the
Board. If this needed to be exceeded the matter would come back to the Board;
¢ Some Postmaster and other Company policies had been considered and approved
by ARC;
Deloitte had been re-appointed as co-sourced IA;
* Correspondence had been received from the FRC querying how we had treated
some matters in the accounts. A reply was being prepared to address the queries
and the team had confidence in the response.
4. CEO Report
TABLED and NOTED was the CEO report.
The Chair invited NR to speak to the Report. NR advised as follows:
8 of 134
¢ we had made our first trading loss for the period, which was slightly alarming;
Industrial Action was going to cause further operational dislocation, and we would
be impacted in addition by the RMG strike action;
¢ The Industrial Action aligned with the cost-of-living crisis saw the Voice of the
Postmaster group mobilising themselves. Correspondence had been received at 3
distinct times, the first of these being on S August when NR had received 100
emails that there were circa 550 Postmasters who had joined the Voice of the
Postmaster. The last date of receiving a group of correspondence was on 14
September when Postmaster’s pay statements became available. The Postmasters
who reacted on 14 September were from branches who had a large amount of
fixed income rather than variable pay, so would benefit the least from the raft of
changes to Postmaster remuneration. NR advised that his response had been that
the Company could not solve for macro-economic conditions. The issue of
Postmaster remuneration would be considered carefully again ahead of the
November Postmaster conference; en
© In terms of a pay award, although originally, we had spoken about a! IRRELEVANT!
this was more likely to bef ‘payment. This offer _
rejected by the CWU at present. This was a very difficult issue, when we were
seeing our cost base rise;
* The new Minister for Postal Affairs had been announced yesterday and NR would
meet with the new Minister in the next couple of weeks;
Page 6 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL00458418
POL00458418
2.1
POL-BSFF-138-0000004_0007
POL00458418
POL00458418
Tab 2.1 Minutes from 27 September 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
* Combined with Her Majesty the Queen’s death it had been quite difficult to get a
handle on trade. All retailers seemed to be struggling with trade at present. If our
Postmaster’s are subjected to further rising costs, we have a difficult cocktail
brewing ahead of peak;
¢ Inrelation to the 3YP, what we are trying to do is to bring some life to the
challenges and the consequences that we are presented with. A list of anticipated
decisions for Board had been prepared for the next few months; these calls were
not easy, and the Board would need to discuss whether we had the capacity and
the funding to make some of these decisions;
Regarding the social purpose of the Post Office, we were looking to see whether
we could achieve vulnerable business status with the government. C Creswell had
pushed back on this initially, however. LH queried how an entity obtained
vulnerable business status. NR advised that when he had spoken to C Creswell, he
had asked what we needed to demonstrate. EJ referenced the pay outs currently
being distributed by the Post Office. NR further advised that he had been clear
with R Taylor that we needed to punch quite hard here.
NR paused and called for questions.
LH noted the update to publish the ARA in December and advised that we simply could not
publish the DRR in the current context. AC confirmed that the Company were not going to
publish the ARA until December.
NR advised that from a trading perspective we were in pretty good shape, and that the
churn numbers were extraordinary, however we needed to understand why. It might be
that our elderly Postmasters had no alternative and could not pass in their keys. The cost-
of-living crisis was likely to hit them very hard with business rates and energy costs where
they were. Management were looking to get under the skin of this issue to understand it;
there was a concern as to whether we were just storing up a problem, as it did not feel
right. SI queried whether management had spoken to any of these Postmasters? NR
replied that he reviewed the Voice of the Postmaster correspondence and he thought that
Postmasters were perhaps hanging on for the peak. EJ reflected that in the absence of
selling their business, it was not the easiest exit for Postmasters who needed to wait for a
break in their lease. ZP asked for confirmation that we did not know when the lease
breaks were. NR advised that this was correct. We projected 500 branches of churn, and
that has been revised down to 300 given we had had an extraordinary 6 months. EJ
reflected that the recent remuneration announcements could assist Postmasters to hang
on for a bit longer.
SI advised that he had found out about the additional banking hubs via another
Postmaster. NR took the point however asked SI to please remember that we did not run
the process and advised that we also knew nothing about the launch and that there had
been no prior consultation with us. The challenge for us was how to roll these out and we
needed to come up with a set of rules for the pipeline as to who could apply and how. A
further challenge was getting the banks to recognise that we were the only ‘gig in town’
left to do this.
EJ advised that Postmasters were being very badly eroded online by RMG and shared his
view that this was the biggest issue for Postmasters. EJ referenced the stamps that were
being discontinued and advised that Post Offices were taking in all RMG stamps which
involved considerable work however Postmasters were not being remunerated for it.
Page 7 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22 9ol
POL-BSFF-138-0000004_0008
Tat
1 Mi
5.1
POL00458418
POL00458418
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
SI noted a rise in the number of BRP cards to distribute in branch. NR queried why the
numbers had risen at present. SI advised that he thought this could be attributed to NR/M
students. ACTION NR advised that he would speak to M Roberts about this. Roberts
ZP requested that NR provide an update on McColls, and also requested that during the
discussion on the 3YP the Policy Review was considered. NR proceeded to provide an
update on McColls including the number of Post Offices potentially to be closed and the
possible timing.
EJ raised the issue of the limits banks were imposing on cash deposits and the difficulties
Post Offices were experiencing as a result. NR advised that he had spoken to M Kearsley
on this on Friday and provided assured that he was on this.
The Chair called for questions. There were no further questions.
Finance
Financial Performance Report
TABLED and NOTED was a report, ‘August 2022 (P5) — Performance Overview’. MJ and NB
joined the Meeting at 14:05.
AC spoke to the report, advising as follows:
* The Company had performed better than budget, largely because of FRES.
However, we could see travel returns levelling off;
The position on mails was ugly. The Chair queried what the feeling for September
was. AC replied that this was difficult to assess with the additional bank holiday
due to the Queen’s death and industrial action. Despite this however, AC saw no
grounds for thinking that the trend was incorrect, and AC was not confident about
Christmas trading. LH queried whether we had any market context data. AC
replied that it was the market definitely. BG noted that!==-~las a business were
tracking {1 AC shared his view that RMG appeared to be uniquely
troubled. RMG were threatening to split the business into 2, selling off the
international business and repatriating those funds to the shareholders, then
leaving a UK business;
* arevised forecast was being prepared; we had been comfortably ahead of budget
until this point;
© Ourstrategy on Postmaster losses needed to be reviewed. The Company had a
policy and a process to recover losses from Postmasters; what we think we need
to do in these situations is instigate the conduct of thorough investigations.
Postmaster losses were becoming material for the Company and had the capacity
to hurt Postmaster remuneration. In August Postmaster losses were j
had budgeted” We had been hoping that we would
not start actively disputing Postmaster losses until we were off Horizon however
on these numbers we could not wait. We could have lots of tactical conversations
Management did not think that
Page 8 of 21
STRICTLY CONFIDENTIAL
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0009
Tab 2.1 Minutes from 2:
5.2
POL00458418
POL00458418
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
this was an issue that could wait. EJ queried whether there were any themes
around the losses. AC advised that a common theme was a Postmaster
distributing money and then recording it as zero. When we rolled out NBIT in
2024 we would go into branches and count everything on the day we did the
change-over so nothing historical was carried into NBIT. S! queried who would do.
this. NR queried whether this needed to be an independent. EJ shared his view
that this would not need external verification and could be completed with the
Postmaster. AC advised that we would need to prepare over the next 12 months
to undertake this activity;
¢ branch numbers were quite good, and it was mostly outreaches that had been
closed.
The Chair asked if MJ or NB had any points they wished to contribute. NB advised that we
presently had comfortable head room. MJ noted the volatility on mails however banking
performance remained strong.
The Chair called for questions. ZP observed that the numbers on PUDO were tiny. MJ
replied that this was due to delays and getting devices working. NR advised that
management were on this.
Working Capital Facility Increase
TABLED and NOTED was a report, ‘Working Capital Facility Increase for peak trading period
FY22/23’.
AC spoke to the paper advising that, given conditions, the request was coming slightly
early this year, as opposed to in previous years when the request was made around
Christmas.
BT queried the nature of the approval sought; was it approval to reduce the buffer if and
the impending peak management were attempting to make sure no Postmasters were
carrying a really dangerous level of cash. SI queried whether management were
monitoring this and assisting. AC replied that they were. SI queried whether reporting on
this was undertaken. NR replied that it was, then the team reviewed the reporting and
acted. EJ queried whether we were looking at recirculating our cash to the ATM networks.
AC replied that we would like to do this, however it would cause an issue on the Bank of
England facility, although this was something which we could likely resolve. SI commented
that on the cash counting front he had been trialling some Glory counting machines and
these were game changing. In addition, the new ATMs were phenomenal; customers liked
the new machines, and these were much easier to fill.
The Chair called for questions. There were no questions.
The Board RESOLVED to APPROVE the delegation of authority to the Group Chief Financial
Offi Group Financial Controller, to authorise temporary increases in the level of
the! I Working Capital Facility for the period 27 September 2022 through 31
January 2023.
A short recess was taken between 14:25 — 14:31.
Page 9 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22 110
POL-BSFF-138-0000004_0010
POL00458418
POL00458418
Tab 2.1 Minutes from 27 September 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
6. Three Year Strategic Plan Overview and Risk Tolerance Considerations
TABLED and NOTED were the following papers:
(i) ‘Three Year Plan’;
(i) ‘Accelerating the Network Strategy’;
(iii) ‘Mails 3YP’;
(iv) ‘HMBU Cost Challenge’; and
(v) ‘Risk in the 3YP’.
TM joined the Meeting at 14:30.
AC outlined the paper, advising as follows:
What was sought from the Board today was high level alignment on the challenges
and an appreciation of the decisions to come. Decisions in relation to the 3YP
would be sequenced over the 2 Board Meetings in November and December;
¢ We have seen quite clearly that the Company? } if we
keep going on as is, and there is no way we can finesse this. We need to tackle
this head on and forcibly;
* To get more support from government we need to demonstrate self-help. We had
made this point to the shareholder and the shareholder had in turn made this
point back to us;
© Management still had more work to do — the paper represented a hypothesis not a
plan;
© one of the things worth enforcing was that it was the security headroom rules that
would make the Company no longer viable, that is, it is a cash measure
fundamentally and that creates a simplicity about how we focus our efforts going
forward. Postponing cash outflow will help. We are going to have to be sensible
about this and we will take advantage of this where we can;
e the next 2 years look fundamentally differently to what we thought;
* onthe basis of the submissions the business put in, in September, we would
breach security headroom next year. The! ___ IRRELEVAI
‘With this. We need to be careful however as the numbers are quite volatile — for
example the security headroom in P5 looks quite good however this needs to be
matched against the compensation payments that will need to go out. We will
update on these quarterly;
the change in mails is the biggest change;
the HMU spend has gone up significantly, with the budget submission detailing an
increase of = for HMU and the Inquiry;
* we were seeing higher costs on pay and inflation increasing materially;
inrelation to Postmaster remuneration, having falling Postmaster remuneration
over the next few years did not feel right, so this has been increased although was
not keeping pace with inflation;
e the paper set out a high-level hypothesis on how we could close this gap. AC
spoke to each of the items including stopping Belfast Exit and the approach to
NBIT. In relation to HMU the business submission was being challenged and we
would have to insource things. On the Inquiry, the team has attempted to reduce
the additional I spend forecast, however we do not think we will be able to
Page 10 of 21
STRICTLY CONFIDENTIAL
12 of 134 POL Board 01/11/22
POL-BSFF-138-0000004_0011
POL00458418
POL00458418
Tab 2.1 Minutes from 2
ember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
unpick this entirely given the Inquiry is going to run for a longer period than first
thought;
¢ NR queried what the Finance team thought the effect of interest rate rises on BOI
would be, and whether the increases would be linear. MJ replied that whilst the
increases were not linear, they were predictable;
¢ LH noted that whilst the 3YP required us to focus short term we needed to be
looking beyond this as well, and there needed to be a growth angle to what we
were doing if we could afford it. MJ replied that there was, however NBIT would
limit what we could handle. LH replied that NBIT should not limit what we could
sell online. EJ advised that he was indifferent to where products were sold,
provided Postmaster could share in the reward. LH noted that there were going to
be many customers who didn’t go into store anymore, and we needed to think
about this. EJ emphasised that we needed to think beyond the 3YP, and that we
needed to make to selling products online, and not miss this opportunity;
¢ NR would be chairing a key steering group every 2 weeks tracking progress against
the 3YP. In terms of vacancies, the ask was to bring hiring proposals including that
of contractors to the steering group to see if any capacity could be created;
* AC was concerned about the November Postmaster conference as there was the
expectation that we were going to make more announcements on Postmaster
remuneration, however AC did not know where this money was going to come
from. AC was also concerned that if we sought government assistance, yet went
back a second time to help Postmasters, that that may not be well perceived by
government;
© Taking!mssev out of operating costs over the next 3 years was very considerable.
had been put aside for redundancies;
¢ The roll-out of NBIT was being discussed in earnest. Area managers in 2024 were
not going to be able to do their day jobs, so there would be an impact on the call
centres. We needed to work this through;
© We were going to need to have a lot of discipline and we needed to re-balance the
relationship with Postmasters. NR agreed with this and the need to raise the bar
on the relationship. This would involve moving to the use of Branch Hub rather
than operating on a multi-channel basis, and requiring end of week balancing to be
performed as we would simply not have the infrastructure to assist in a manual
way;
© AC's view was that we were going to have to focus distributing remuneration to
fewer and more viable Post Offices. In terms of the policy review, the assumption
had been made that nothing would change over the course of the 3YP in this
respect;
© ACshared his view that we would need to operate more pushily within the rules,
for example by putting out 2,000 Drop and Go’s in the next 2 years and closing a
number of outreaches. This would be the first time we deliberately shut Post
Offices and did not re-open them.
ave to be prepared to face a lot of noise In communities and wit
Postmasters. Some of these things we could do in tandem with the roll-out of
NBIT such as closing branches. NR advised that there were changes that the Retail
team thought could be executed now;
© AC advised that we coul ow RRELEVANT. and outsource supply
chain entirely. We would need to build a case seeking funding from government
to enable these activities.
Page 11 of 21
STRICTLY CONFIDENTIAL
POL Board \ 13 of 134
POL-BSFF-138-0000004_0012
Tab 2.1 Minutes from 2:
14 of
34
lember 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
The Chairman observed that the immediacy of solving for the gap was inextricably linked
to defining the shape of a viable network. Putting aside historical issues, there were
problems we were grappling with, particularly in that as the business of our main partner
RMG went down, so did ours. The inescapable solution was that we needed to reduce our
cost base. This seemed to be premised on achieving 2 key elements, firstly whether we
hen secondly articulating the optimum size of the
network. If government required a bigger network, then the shareholder would need to
pay for that. We needed to run a commercial network; the current network was not
sustainable. These are the self-help measures we could take. BG queried whether the
Board was satisfied that a debate on the insurance business was called for. It was agreed
that a discussion on the insurance business was required. The Chair cautioned that the
Board needed to be very careful that we did not have a repeat of the sale of the telecoms
business.
AC advised that the 3YP and accompanying decisions would be brought back to the Board
in November, then in December, with approval then sought from the shareholder.
LH queried whether in the 3YP we were trying to intercept the policy review. NR replied
that we were to a degree, and asked TM to speak to this, as there was a political overlay
here. Before passing to TM NR spoke briefly to the timeframes for the policy review and
shared his view that the shareholder was not exactly running at the exercise; no Chair had
been appointed as yet. TM detailed phase 1 and phase 2 of the policy review and noted
that the intent would be to consult from Spring next year, although the timetable had not
been complied with to date, particularly in relation to the appointment of the Chair. There
was a risk that once the Chair was appointed that they may wish to do things differently.
In relation to the 3YP and funding options, BEIS would likely find it difficult to fund us, so
we were looking at other options. LH observed that we would need to make some difficult
decisions in respect of the 3YP ahead of the policy review. TM took the point however
advised that this would create a catalyst for the necessary conversations.
AC advised that
close down I IRRELI
ue that was adding a lot of urgency was NBIT; if we were going to
_EJ queried whether we were backing th:
IRRELEVANT
I advised that a red
line in his view was the potential to reduce the current ‘white space’ proximity rules by the
introduction of a significant number of Drop & Collects. Postmasters had adhered to the
rules for a number of years, so how would it look if this was changed now. AC replied that
if we don’t do this then we would be unable to realign the remuneration. TM queried
whether it was format type that was the issue; for example, if a Postmaster had a main,
then we would assume they wouldn’t want a main introduced within the proximity or was
it that they would not want a Drop & Collect. SI replied that they would not want either.
Page 12 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL00458418
POL00458418
2.1
POL-BSFF-138-0000004_0013
POL00458418
POL00458418
Tab 2.1 Minutes from 2:
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
{AC advised that it was
raised the
that it would be much better to shrink NBIT and have
she had IT concerns as well, particularly in relation to
The discussion turned to HMU matters and AC noted that one of the difficult decisions to
come was in relation to late applications and how this would be administered. BT queried
how costs could be pushed down in relation to the Inquiry. NR advised that he was in
dialogue with BF on this, and that the quality of the HSF team was not what we needed it
to be. We needed something more operational to assist us in the next 15 months. This
was a question that we knew we needed to answer.
ZP shared her view that when we spoke to BEIS as shareholder that we would need to use
a different voice, cautioning them that we would not be a going concern if the mails
trajectory continued. Once we have a plan, we needed to have a different conversation
with Postmasters and that voice needed to change as well.
The Chairman drew the discussion to a close. TM, MJ and NB left the meeting at 15:27.
7. Mails 3YP
OW and NO joined the meeting at 15:28. A paper was provided in the meeting.
OW introduced the paper advising:
the team were looking to get under the skin of the 3YP in relation to Mails;
«the boost in volumes for mails during covid had fallen away;
© when looking at ery clear was that itionly going in one
direction and that the ‘was worsening as time went on. It was
assumed that this pressure would continue for the foreseeable future. It was not
“jhowever, there was an active risk to the investor, and
business was going to their competitors;
© the current circumstances raised whether we would need to take more actions on
st base in the 3YP and illustrated the importance off, IRRELEVANT
BT queried whether we had any sense of what the government's interaction with RMG
was. OW replied that we did not have any intelligence on this although we had asked. The
scrutiny BEIS was applying was only 10 days old, however they would be worried about
delivery of the USO. ZP queried whether the team could do some more work on war
gaming. ACTION OW replied that the team had included some materials on this in the
pack for the Board Strategy Day in July and that the team would need to come back on
this.
Page 13 of 21
STRICTLY CONFIDENTIAL
POL Board
01/11/22 15 0
POL-BSFF-138-0000004_0014
POL00458418
POL00458418
Tab 2.1 Minutes from 2:
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
OW passed to NO. NO advised:
« he wished to look at the 3YP in terms of Mails and why that had changed in the
latest version versus the previous submission;
he would also speak about RMG and what the team were doing to sure up the
relationship;
the mails business was facing into some extreme challenges including the decline
in mails post covid, migration to sales online away from in branch,
disintermediation from RMG, and that falling away of the international market due
to Brexit and customs declarations. Given these challenges the latest 3YP showed
a different trading profit from mails;
There were 3 key reasons, the first one being that we were working off the wrong
baseline, there had been an assumption that levels post pandemic would remain
however levels had dropped back down. ZP queried whether this was just because
we were in an economic crisis; that is, if we looked at a 5-year period would this
unwind. OW replied if the pandemic period was removed, then then trend looked
pretty stable. We had flat lined for the outer period of the 3YP, and we thought
that this was appropriate. The cost-of-living crisis may conclude earlier so the
trading may not be as bad, however. BG referenced other businesses operating in
this market, and, that whilst we were seeing trading ease off, other businesses
were retaining earnings from the covid period, which suggested the issue is with
RMG. NO agreed with this and advised that RMG were simply losing market share;
* Moving to the second reason, this was the extent of disintermediation by RMG,
who were desperately trying to find ways to sell outside Post Office, for example
by collecting from homes;
© The third reason was the change in international which had had a huge impact on
our business particularly parcels. The mails team were currently looking at
solutions with RMG to try to digitise the customs declaration;
The Chair referenced the incremental mail from non RMG sources and queried how much
of the aggregator was built into the revised figures. OW advised that this was fully built in.
We were trying to build a new business in this respect and the benefits would be from
years 3 and 4. It was hard to escape the conclusion that in the short term that there was
not much more we could do. It was very hard to model the travails of the current RMG
who had fixed cost issues the same as us and they had not invested in automation.
ACTION OW noted that in the July Board Strategy papers the mails team had included
numbers for the outer period, however this work would be revisited to understand what ow/NO
an Armageddon situation might look like.
The Chair queried, whether, given the USO, if government controlled the fortunes of RMG.
The problem was that the fortunes of both the Post Office and RMG were driven by the
same issues. BT shared his view that there must be war gaming going on within BEIS, as
they were going to have to deal with this and the USO. AC advised that there had been
high level discussions with RMG about putting the businesses back together, however the
industrial issues had to be resolved. EJ shared his view was that the problem was that Joe
Public thought that the Post Office was RMG. On strike days the Post Office was losing
business as people thought that we were closed. NR replied that he thought that the
Company was quite busy online in terms of communicating the message that we were
open. EJ continued, that if the industrial action was ongoing, we needed a better strike
strategy.
Page 14 of 21
STRICTLY CONFIDENTIAL
16 of 134 POL Board 01/11/22
POL-BSFF-138-0000004_0015
POL00458418
POL00458418
Tab 2.1 Minutes from 2:
ptember 2022
POST OFFICE LIMITED BOARD MEETING 2.1
Strictly Confidential
The Chair provided an overview, advising that if we looked at this from a market
perspective, that society was simply not very interested in letters, and that we had a very
unhealthy market that relied on USO and a very ineffective method of distribution. We
could be revolutionary and say that a big chunk of this activity is not needed and change
that marketplace. The knock on of this would be what did we need the Post Office for and
Id it make money. We needed to re-shape the Post Office so that it wasi:
IRRELEVANT I We needed to extrapolate forward and determine what was the shape of
the Post Office in S years and then make the changes for this today. OW agreed with this
and advised that the mails team were doubling down on implementing the strategy and
would report back to the Board before the end of the year. EJ queried where the work in
relation to the online aggregator was up to. NO provided an update advising that there
had a lot of progress and that Parcels to Go were very interested. OW advised that the
mails team would likely have a pretty good idea of where this was at by the end of the
next month. BG queried the potential time for launch. NO advised that we still looking at
Q3 next year and that the team were working on procurement. EJ exclaimed at this and
queried whether we were going to lose a year in execution. OW replied that the mails
team were going to implement as quickly as they could. LH and SI both expressed concern
on the timeline.
The Chair called for further questions. There being no further questions OW and NO left
the meeting at 15:59.
CS queried whether there were any aspects of the mails strategy could be brought to
fruition prior to Christmas. NR advised that the GE would look at this Thursday. LH shared
her view that she did not think that the online piece was that technical. BG advised that
the proposed implementation period was a lot longer than he was expecting.
8. Belfast Exit
TABLED and NOTED was a paper, ‘Belfast Exit Programme’. ZM and JS joined the Meeting
at 16:02. The Chair spoke briefly to the paper and advised ZM and Js that they should take
the paper as read.
JS outlined the paper. Key discussion points were as follows:
* CS noted that there was no fail over plan. We had not tested, and we needed to
do this. CS referenced the scope that would need to continue in relation to NBIT,
and that we needed to ensure that this was sured up;
© CS queried what our plan B was, if we didn’t get there in 2025. CS advised that she
would reluctantly support the proposal however CS had a number of concerns
including the lack of fail over testing and engagement with Fujitsu. ACTION In
response to CS’s first concern in relation to the fail over plan, ZM advised that the
team had commenced the fail over plan yesterday and should have an update on
this at the next Board Meeting in November. In terms of how we were engaging
with Fujitsu, Fujitsu had put in place mechanisms for retention through to 2025,
however ZM thought that if by 2023 it did not look likely that we would be exited
by 2025, that that could make a difference to Fujitsu and that we could have some
further leeway with ZM;
© CSraised a further concern being the accounting treatment and that we would
likely have a large write off on this investment and queried whether there would
be public cost issues;
Page 15 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22 17 0
POL-BSFF-138-0000004_0016
Tab 2.1 Minutes from 2:
ptember 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
BT shared his view that he felt that we were getting the worst of every option
here, unless it could be established that we can hit March 2025, and the team
appeared reluctant to give this assurance. NR responded that ZM was not
reluctant. AC advised that the de-risking of NBIT would be returned to the Board;
proposals such as removing lottery from our product set were being worked on by
ZM and the team;
ZzM advised that whilst difficult decisions would need to be made so as to deliver
NBI
{IRRELEVANT I Js provided a breakdown on the "being service fees
for Fujitsu, as well as an upgrade for the centres. BT noted that the team were
assuming that Fujitsu would continue to provide the services on the same basis
that they were doing so currently. AC clarified that if we went to Fujitsu and asked
them to extend beyond March 2025, if we assumed that they could be persuaded
this would be a cost o' then there would also be further capital investment
in the data centres as they are so old, which we thought would be approximately
“} So, the spend would presenti: 'for the first year, then i
year thereafter. BT advised that he was trying to balance these costs against the
costs of AWS to complete; it seemed that we were being told it was too risky and
expensive to remain and that seemed right, however the outer limit of AWS
expenditure to complete was The Chair pointed out that this amount had
not been verified. BT noted this and advised that he did not think the Board had
full visibility here. AC advised that if we continued with AWS there was no
guarantee on cost or time so this would not obviate the risk of having to extend
with Fujitsu;
The Chair shared his view that we needed to look at the deliverables for March
2025 and ascertain what was the least risky way to get to that point. What
concerned the Chair was our track record on previous projects. AC replied that
NBIT was scheduled to commence roll out in February 2024, then to be fully rolled
out in throughout the balance of 2024;
EJ queried whether we would receive any funds back from AWS. JS advised that
we would not, and that we needed a strong relationship with AWS to deliver the
relevant scope for NBIT. LH noted that discontinuing the Belfast Exit would not be
good news for AWS; their pitch had been that they would crack what Microsoft
could not;
ACTION ZP advised that she wished to have more clarity on the economics of the 7M
proposal and asked for a separate session on this. ACTION AC noted this, and that zm
management would need to return with a roll out plan and committed to
arranging sessions for these for the end of next month;
ACTION ZP queried whether we were sure that we were not giving our successors
a problem on inflated operations costs and asked that management come back on
this. The Chair agreed and noted that this represented a large element of our cost
structure. The Chair advised that when we were imposing a large amount of
change the benefits needed to be significant. ZM advised that we could not stay
indefinitely on Horizon. LH contributed that we needed to take responsibility in
house;
ACTION The Chair asked for further details as to the risks and outcomes associated
with the options; bad decisions were sometimes made because the alternatives zM
were not fully understood. AC agreed that when the matter was returned to the
Board that the team would include this analysis. The Chair emphasised the
importance of understanding the other options.
zM
The Board RESOLVED:
18 of 134
Page 16 of 21
STRICTLY CONFIDENTIAL
POL Board 01/11/22
POL00458418
POL00458418
2.1
POL-BSFF-138-0000004_0017
POL00458418
POL00458418
Tab 2.1 Minutes from 27 September 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
(i) the cessation of the Belfast Exit programme be and is hereby approved, save to
IRRELEVANT
(ii) —_the reinforcement of the legacy data centres be and is hereby approved;
(iii) programme funding for October be and is hereby approved to enable
‘amme activity to be wound down and Belfast fortification and
components shared with NBIT to be implemented.
Fujitsu Contract Extension
TABLED and NOTED was a paper, ‘Request for Delegated Authority to execute the final 1-year
of the Fujitsu Horizon Services’.
JS spoke briefly to the paper, advising that an extension in respect of the data centre
contracts with Fujitsu would be required also, and that this would be brought to the next
Board meeting.
The Board RESOLVED that the following be and are hereby APPROVED:
(i) The exercise by the Company of the final 1-year extension of the Fujitsu
Horizon Services Agreement for the period 1 April 2024 — 31 March 2025;
(ii) The issuing of notice to Fujitsu in respect of the extension; and
(iii) Signing of the notice to Fujitsu by any Company Director or the Company
Secretary.
SPMP Funding Request
TABLED and NOTED was a paper, ‘SPMP Oct 22 — Jan 2023 drawdown’.
The Chair called for questions. LH queried whether there was anything different we could
do on key employee risk. ZM replied that he had 3 FTE concentrating on this as well as
external resource. LH queried when it would be possible to see the new counters. ZM
replied that this would be possible shortly and Directors could view the new counters in
the model branch.
The Board RESOLVED that the following be and are hereby APPROVED:
(i) the programme funding of for the planned deliverables from October
2022 to January 2023 {_ J Exceptional); and
(ii) the programmes’ end date be moved from 31 March 2024 to 31 March 2025 with a
new set of key milestones.
ZM and JS left the meeting at 16:44.
9. Historical Matters
91 Historical Matters Unit Update
TABLED and NOTED were the following papers:
(i) ‘Historical Matters Programme Update’;
(i) ‘HMBU Finance Update’;
(iii) ‘HSS Pre-Offer Funding October 2022’; and
(iv) ‘HSS Post-Offer Funding October 2022’.
Page 17 of 21
STRICTLY CONFIDENTIAL
POL Board Meeting-01/11/22 19 of 13
POL-BSFF-138-0000004_0018
9.2
9.3
POL00458418
POL00458418
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
SR and BF joined the Meeting at 16:45.
SR proceeded to speak to the papers advising as follows:
© The total number of overturned historical convictions was now up to 81;
© On HSS the team had passed the 80% target of offers out by the end of August.
The team were on a trajectory to deliver 95% of offers out by the end of October
although this would be a stretch;
* The ENE process conducted before summer break was a success and delivered a
good outcome. The process had seen good behaviours and had been very
collaborative. The process had given us a template to implement against;
© Ondetriment 1, suspension payments, we were waiting for HM Treasury to make
a decision;
© On OHC we were moving from a negotiation approach to the mediation approach;
* On detriment 2, outstanding balances, there remained a lot of work to be done;
© Pre-offer and Post-offer funding for October had been approved by way of
delegated authority. Further funding approvals would be requested for
November.
The Chair called for questions. EJ commented on the high calibre of the process and the
HMU lead team.
Public Inquiry Update and Funding Request
TABLED and NOTED were the following papers:
(i) ‘Post Office Horizon IT Inquiry: Update’;
(ii) “Briefing Note on the Inquiry’s confidentiality undertakings’; and
(iii) ‘Horizon - Opening Statement’.
FC joined the Meeting at 16:53 and KG at 16:54.
Inquiry — Opening Statement
Confidential: to discuss legally privileged advice
BF provided an overview and that he would take the draft Opening Statement as read. BF
introduced KG and advised that KG was in attendance to answer any questions on tone or
specifics in relation to the draft Opening Statement.
rage 18 01
STRICTLY CONFIDENTIAL
POL-BSFF-138-0000004_0019
POL00458418
POL00458418
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
BF
SR
BF
The Board RESOLVED:
(i) That the form of the Company's Opening Statement to the Inquiry and submission
thereof in the form tabled be and is hereby APPROVED;
(ii) to DELEGATE authority to the Company’s Group General Counsel and Inquiry
Director to make any minor amendments to the form of the Opening Statement
tabled; and
(iii) that funding in the amount of £1.8m funding for October be and is hereby
APPROVED.
BF, KG and FC left the Meeting at 17:11.
10. Approval Requests
10.1 Procurement
TABLED and NOTED were the following papers:
Page 19 of 21
POL-BSFF-138-0000004_0020
Tab 2.1 Minutes from 27 September 2022
22 of
34
iL,
111
11.3
11.4
1s
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
(i) “Procurement Report’;
(ii) “Appendix A - CCS Procurement Gas and Electricity for POL Estate’; and
(iii) ‘Appendix B - SPMP Branch Point of Sale (POS) Equipment and Peripherals
award’.
The Board RESOLVED that:
{i) The award of a contract for Gas and Electricity Supply for DMB’s, Secure
Warehouses and Administration Centres for mainland UK via CCS
Framework RM6011 — Supply of Energy and Ancillary Services on a 24-
month contract commencing April 1 2023 with a total value for the call
off in the vicinity of £7.96m be and is hereby retrospectively
APPROVED;
(ii) the form of the Electricity and Gas contract, being the standard form
Crown Commercial Services Framework RM6011 — Supply of Energy
and Ancillary Services contract (the ‘Contract’) be and is hereby
retrospectively APPROVED; and
(iii) any one executive Director and/ or the Company Secretary be
authorised to sign the Contract.
Noting Papers with no Presentation
Health & Safety Report
TABLED and NOTED was a paper, ‘Health & Safety Monthly Report’.
ACTION EJ noted the revised approach in relation to Covid set out in the Report and
queried whether this was going to be shared with Postmasters. AC advised that it would
be.
AC
POL Control Framework
TABLED and NOTED was a paper, ‘DRAFT Internal Control Framework’.
CS spoke briefly to the paper advising that the paper had been considered by the ARC.
Improvement Development Group Update
TABLED and NOTED was a paper, ‘IDG Update’.
Pensions — Augmentations to RMPP.
TABLED and NOTED was a paper, ‘Project (Pensions) Assurance — Post Office Section Royal
Mail Pensions Plan (RMPP)’.
The Board RESOLVED to APPROVE any 2 executive Directors or an executive Director and
the Company Secretary be authorised to execute the Memorandum of Understanding
between the Company and Royal Mail Pensions Trustees Limited in the form provided.
Common Issues Judgement/ Horizon Issues Judgment Dashboard
TABLED and NOTED was a paper, ‘Common Issues Judgment Dashboard PS’.
Page 20 of 21
STRICTLY CONFIDENTIAL
POL Board Meeting-01/11/22
POL00458418
POL00458418
POL-BSFF-138-0000004_0021
POL00458418
POL00458418
Tab 2.1 Minutes from 27 September 2022
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
11.6 Investigations
TABLED and NOTED was a paper, ‘Post Office Investigations: Next Steps’.
The Chair called for questions. LH advised that she thought the approach was sensible
however queried the tone of the paper. ZP advised that J Bartlett was very experienced
and competent. BT agreed with this and shared his view that J Bartlett was the right
person for this.
12. Noting and Governance Items
12.1 Officer Changes
TABLED and NOTED was a paper, ‘Officer Changes’. This matter was dealt with previously
in the Meeting during the Chair’s update to the Board on the work of the Nominations
Committee.
12.2 Committee Memberships
TABLED and NOTED was a paper, ‘Appointments to Board Committees’. This matter was
dealt with previously in the Meeting during the Chair’s update to the Board on the work of
the Nominations Committee.
12.3 Sealings Report
The Board APPROVED the affixing of the Common Seal of the Company to the documents
set out against itemsnumber 2146 — 2155 inclusive in the Seals Register.
12.4 Future Meeting Dates
The future meeting dates were NOTED.
12.5 Forward Agenda
The Forward Agenda was NOTED.
13. Any Other Business
There being no other business the Chairman declared the meeting closed at 17:15.
14. Date of next scheduled meeting
1 November 2022 10:00 - 14:25.
Chairman Date
Page 21 of 21
STRICTLY CONFIDENTIAL
POL Board Meeting-01/11/22 23 of 13
POL-BSFF-138-0000004_0022
VEL JO bZ
22/1 L/L0-Bunee— pie0g 10d
POL00458418
POL00458418
B
4
iy)
Post Office Limited Board Actions as at 27.10.2022 2
5
Action I MINUTE REFERENCE ACTION ACTION OWNER DUE DATE STATUS OPEN/CLOSED .
No.
i Annual Board and EJ noted that there were some interesting Rachel Scarrabelotti Update on 16/09/2022: Deferred to To Close
Committee Evaluation divergencies between the executive and non- December Board Meeting.
executive director scores. The Chair agreed with
this and noted that scoring divergences were
then different across different areas. The Chair
requested that the Board discuss the Report at a
future Board dinner.
2. CEO Report SI touched on software and shared the example I Nick Read/ Jeff Smyth IUpdate on 16/09/2022: Js discussed Ongoing
9 of a Postmaster investing time in undertaking a requirements with SI and follow up actions
customer transaction only to be told at the end jwere undertaken with product teams to
of the transaction that the transaction was Ireview requests for change in Banking
unsuccessful. SI advised that he had raised this [transaction journey, enhancements to MailsI
with JS about 6 weeks ago. ACTION NR [Drop & Go and Government DVLA look-up
undertook to speak with JS on this. functionality. JS to follow-up with product
jteams to determine if they agree with
Ipriorities in overall backlog (and change
funding is available).
\Update on 08/07/2022: JS met with SI to
discuss a range of Horizon improvements
Ithat SI would like to see implemented.
iThese include transaction changes to
Banking Deposit journey, Mails Drop & Go -I
IAuto-Top-up & SMS, MoneyGram
lexploitation of EasylD, DVLA Rates Look-up,
Stamp Bar-Coding. JS to follow up to ensure
these requests are included in demand
lbacklog and to revert to SI with next steps
Iby end July 2022.
Strictly Confidential Page 1 of 9
nN
ND
POL-BSFF-138-0000004_0023
By
o
D
8
a
o
@
é
é
pel soz
Post Office Limited Board Actions as at 27.10.2022
POL00458418
2. FY 2022 - 2023 Budget
a)
ZP suggested that once a quarter the Board
engage in a deep dive on the 2022/23 Budget, so
that if things weren't progressing as against the
Budget the Board would have an opportunity to
get ahead of this. ZP queried whether the focus
of the Board would need to shift more to
delivery. NR agreed with ZP’s proposal in respect
of initiating a quarterly review process.
‘Al Cameron/ Max
4acobi/ Navin Batra/
Rachel Scarrabelotti to
add to Forward Plan
08/09/2022: This has been included in the
Forward Plan for the Board meetings on
01% November 2022 and 28" March 2023.
This item will be closed on that basis.
2. FY 2022 - 2023 Budget
b)
2. Minutes and Matters
Arising
NR contributed that on Cl it was clear where we
had made progress, however on HIJ this was
much more of a judgement call, and that this was!
why J Smyth was being deployed to work on HU.
TC responded that even if there was uncertainty
this matter needed to come back to the Board.
ACTION NR committed to bring this matter back
to the Board.
ACTION ZM committed to updating the Board on
the time and cost implications of the decision
and to return with an update to the July Board
Meeting.
Nick Read/ Rachel
Scarrabelotti to add to
Forward Plan/ Jeff
‘Smyth
Zdravko Mladenov
Sept Beard
December Board!
Sept Board
November
Board
Update on 16/09/2022: Propose that we
provide a noting paper to December
Board that covers Phase 3 HJ deliverables
(which will be work in progress) and our
overall status position versus HU findings,
including planned NBIT carry-forward
actions.
Update from JS on 08/07/2022: I would
propose that we update Board on overall
HU progress in September (subject to
other priorities and slot availability). We
will be able to comment on areas where
we have closure of an HlJ finding and the
areas which are work-in-progress or
consciously deferred for inclusion in NBIT
scope.
Update on 25/10/2022: Completed as part
of the paper for the October Board.
Update on 16/09/2022: We will update in
November due to congestion in the
agenda in September. Verbal update to be
provided in the regular SPMP item.
Update on 08/07/2022: The update will be
provided through the CEO Report, with a
formal agenda item deep dive in Sept or
POL00458418
a
&
S
>
2
5
é
To close
Ongoing
Strictly Confidential
Page 2 of 9
POL-BSFF-138-0000004_0024
Post Office Limited Board Actions as at 27.10.2022
POL00458418
POL00458418
November as part of the regular SPMP
update and slot.
4, CEO Report
a)
ACTION NR detailed one measure that was being
taken was separating out the IT helpdesk and
bringing this back to ZM's team. A further
update to the Board would be provided on this.
Nick Read/ Zdravko
Mladenov
Sept Board
November
Board
Update on 25/10/2022: This update has
been postponed due to other priorities.
We will aim to cover it as part of the CEO
update.
Update on 16/09/2022: We will update in
November due to congestion in the
agenda in September. Verbal update to be
provided in the regular SPMP item.
Update on 08/07/2022: The Board will be
updated on the transfer of the IT Helpdesk
to Technology via the CEO report in
September.
Prior to that, GE will review investment
options for the Helpdesk, so a decision on
any additional funding can be made prior
to updating the Board.
To close
5.1 Financial Performance
Report
b)
[Individual product profitability report] AC
advised that last time this report was run it had
shown that every product was profitable
however margins varied considerably. ACTION
AC advised that management had been
refreshing this report and would bring this report
back to the Board in July.
Al Cameron/ Navin
Batra
21/10/2022: The team will need to come
back to this in the New Year. The priorities
around the 3YP is the key focus for now.
30/06/2022: Product profitability
outcomes are being reviewed by the CEO
and GE and will be circulated to the Board.
Al will provide a brief, verbal summary on
12" July.
Open
5.1 Financial Performance
Report
d)
In terms of the Local Authority pay-outs, AC
noted that whilst we could determine what the
Postmaster remuneration was, the problem was
that we didn’t have sight of what Postmaster
costs are. ACTION AC committed to reviewing
this, with the local authority pay-outs.
‘Al Cameron/ Max
Jacobi
December Board!
Update on 25/10/2022: We are working
with the Retail and Payments team and
are on course to give an update to the
December board
Ongoing
6, Joint presentation from
the Network and SPM
Teams: Deep dive into Drop
ACTION ZM advised that he would return to the
Board with details on what the upcoming
significant decisions for the Board on NBIT would.
Zdravko Mladenov
November
Board
Update on 25/10/2022: Completed as part
of the paper for the October Board.
To Close
Strictly Confidential
Page 3 of 9
N
ND
POL-BSFF-138-0000004_0025
22/1 L/L0-Bunee— pie0g 10d
VEL IO LZ
Post Office Lit
ited Board Actions as at 27.10.2022
POL00458418
10.
& Collect and wider Horizon
replacement
¢)
3.4 Audit, Risk and
Compliance Committee
)
be.
Payzone represented a significant debtor for the
Company, and it had been queried whether more!
of a provision was required for this. ACTION EJ
questioned whether it was intended to move Pay
Zone to NBIT. AC advised that management
were working towards a conclusion on this and
the general viability of the entity, and © Woodley
was leading on this.
Owen Woodley
Update on 16/09/2022: Delayed.
Discussion ongoing with Chief Retail
Officer.
Update on 08/07/2022: The regular SPMP
update will include a deep dive on
‘outstanding decisions.
08/09/2022: A decision was made at the
‘August SPM Steerco to use Payzone as the
mechanism to deliver NBIT for Legacy Pre-
pay/Bill Payments. Using a Payzone device
for Bill Payment in-branch rather than
building a solution into NBIT will help to
de-risk the delivery of the overall NBIT
programme whilst adding further retailer
benefits (such as service provision out of
core hours). In order to progress with this
option, we are exploring the potential for
integration of Payzone into POL - for whichI
there may be compelling non-NBIT
reasons too. This exploration will take 6 to
8 weeks and if it does not look feasible or
sensible, we will support this NBIT solutionI
via a contractual JV between the two
entities instead. A separate noting paper
on this will be going to the January board
meeting. PZBP has created a 3-year plan
that shows the business becoming cash
generative by 24/25 and would enable
PZBP to start repaying intercompany
monies from that year. Clearly, this issue
would be addressed much more quickly if
integration proves feasible.
POL00458418
a
&
N
is
z
3
5
a
Ongoing
Strictly Confidential
Page 4 of 9
nN
ND
POL-BSFF-138-0000004_0026
POL00458418
POL00458418
Fl
&
S
Post Office Limited Board Actions as at 27.10.2022
8
11. I 4. CEO Report BT queried the status of the NFSP Grant Fund —_I Nick Read/ Martin 29/08/2022: The NFSP are now querying I Open
Agreement. NR advised that the NFSP had not I Roberts/ Shaun one last clause that relates to the VAT
brought the agreement back as yet. ACTION NR IKerrison treatment of the grant payment.
agreed to update the Board and provide a note We are arranging a 4-way meeting with
‘once the NFSP Grant Fund Agreement had been our respective tax and legal teams to get
settled. this resolved.
12. 9. Appointment of External I It was RESOLVED that PwC be appointed as Tom Lee 07/10/2022: A paper will be submitted to I To Close
Auditors external auditors for the Company for the the Board meeting on 01% November
2022/23 financial year, subject to the Board 2022.
receiving a further recommendation from the 23/08/2022: A paper is due to be
Audit, Risk and Compliance Committee on PwC's submitted to Board in November, to
fees, scope, and terms of engagement. outline the procurement route for
retaining PwC for a further 2 years. Subject
0 to Board agreement we'll then seek formal
fe) ARC approval for the FY22/23
@ reappointment of PwC.
g
8 13. I Session Il: Deciding the WayI ACTION TC asked for more detail on the working IChrysanthy Pispinis/ 27/10/2022: Follow — up session took To Close
2 Forward on Mails and up of the projected market share. TC advised — IOwen Woodley place with UKGI on 16th August. Market
& Strategic Commercial that this started at 2 - 3% then ramped up to 9%. share estimates are being refined as the
Considerations CP advised that she did not currently have the strategic initiatives move from prove plans
») numbers with her, however, would supply this to detailed business cases, so further
detail to TC along with additional detail on the updates and refinements will go via usual
volume proposition. PO change governance and business case
approval.
14. _I Session Il: Deciding the WayI Sl also raised the issue of bagging, and that the I Owen Woodley 27/10/2022: We have recently re- To Close
Forward on Mails and Company had never invested in paper bags. launched bands and plastic bank note
Strategic Commercial ACTION OW advised that the team would take envelopes to branches that either have
Considerations this issue away and agreed that TCR was not the high cash returns of who have requested
d) answer. them through Branch Hub.
Rubber bands are still an option as a lot of
branches prefer these but they do now
have a wider choice of supply from us.
15. Session IV: Building a The Chair asked whether there was a data base I Martin Roberts 24/10/2022: We have continued to updateI To Close
Resilient Network Equipped] that existed holding information on each Post our branch-by-branch profitability model
Strictly Confidential Page 5 of 9
POL-BSFF-138-0000004_0027
o-Buneew pieog 10d
v
NS
vel Jo6z
POL00458418
POL00458418
a
&
S
Post Office Limited Board Actions as at 27.10.2022 z
&
for the Decade Ahead office as to how much we were making, staff and which enables us to understand how much
costs. If no data base existed could the area each branch makes from both a POL and
managers find this out and this seemed to be postmaster perspective. This is built using
very basic question. ME replied that the a combination of directly measurable data
information would be the Postmaster’s personal (i.e. POL income & remuneration), our
data and we would need to persuade them to workload modelling tool which has been
give this to us this; we had asked this question of tested with hundreds of different
Postmasters previously and they had not been branches (used to evaluate staffing costs)
forthcoming. The Chair advised that this and indirect assumptions around branch
information would be useful in order to assess overheads (e.g. utilities & rent). We
different parts of the estate; we had asked this continue to refine all these assumptions.
question 5 or 6 times and have not had this and inputs on an ongoing basis, using area
information. ACTION MR advised that the team manager input where appropriate.
would take this away and have a fresh look at i
16. I 2. Minutes and Matters ZP queried whether the action log could be Rachel Scarrabelotti Completed. From the action log submitted I To Close
Arising condensed to remove items that were semi- to the Board meeting on 27" September
concluded or where there was no prospect of 2022, actions that were recommended for
change in the near future. The Chair agreed with closure were removed in addition to
this and requested that a shorter list be compiled actions numbered 11, 17, 34, 36 and 38.
and provided for the next Board Meeting.
17. 2. Minutes and Matters LH shared her experience from other Martin Roberts/ January 2023 Update on 25/10/2022: This is under Open
Arising organisations, who used a change Calendar, and IZdravko Mladenov Board preparation and intended for the January
advised that change projects in the network 2023 Board.
needed to be mapped out ahead of the rollout of
NBIT. ACTION ZP agreed with this and requested
that whether it was in 3- or 6-months’ time, that
M Roberts attend the Board to speak about the
specifics of the NBIT roll-out in the network, to
ensure that we were ahead of this. NR agreed
with this approach.
18. 4. CEO Report SI noted a rise in the number of BRP cards to Nick Read/ Martin Open
distribute in branch. NR queried why the Roberts
numbers had risen at present. SI advised that he
thought this could be attributed to students.
Strictly Confidential Page 6 of 9
nN
ND
POL-BSFF-138-0000004_0028
Post Office Limited Board Actions as at 27.10.2022
POL00458418
POL00458418
ACTION NR advised that he would speak to M
Roberts about this.
19. 7. Mails 3YP ZP queried whether the team could do some Owen Woodley/ Neill I December 2022 I The team will revert on the Mails Strategy I Ongoing
more work on war gaming. ACTION OW replied I O'Sullivan and wargaming on the RMG situation at
that the team had included some materials on the December Board meeting.
this in the pack for the Board Strategy Day in July
and that the team would need to come back on
this. [.....] ACTION OW noted that in the July
Board Strategy papers the mails team had
included numbers for the outer period, however
this work would be revisited to understand what
an Armageddon situation might look like.
20. 8. Belfast Exit ACTION In response to CS’s first concern in Zdravko Mladenov January 2023 Update on 25/10/2022: Verbal update to I To Close
a) relation to the fail over plan, ZM advised that the ARC be provided at the November Board.
team had commenced the fail over plan Formal paper to be submitted to ARC in
yesterday and should have an update on this at January 2023.
the next Board Meeting in November.
21. 8. Belfast Exit ACTION ZP advised that she wished to have more I Zdravko Mladenov January 2023 Update on 25/10/2022: Completed as partI To Close
b) clarity on the economics of the proposal and Board of the paper for the October Board.
_. _ I asked for aseparate sessiononthis. == I . I Follow-up in January 2023. :
22. 8. Belfast Exit ACTION AC noted this, and that management Zdravko Mladenov January 2023 Update on 25/10/2022: This is under To Close
°) would need to return with a roll out plan and Board preparation and intended for the January
committed to arranging sessions for these for the 2023 Board.
L L ae endofnext month, : L . : L L
23. 8. Belfast Exit ACTION ZP queried whether we were sure that IZdravko Mladenov January 2023 Update on 25/10/2022: Completed as partI To Close
d) we were not giving our successors a problem on Board of the paper for the October Board.
inflated operations costs and asked that Follow-up in January 2023.
management come back on this.
24. 8. Belfast Exit ACTION The Chair asked for further details as to IZdravko Mladenov January 2023 Update on 25/10/2022: Completed as partI To Close
e) the risks and outcomes associated with the Board of the paper for the October Board.
options; bad decisions were sometimes made Follow-up in January 2023.
because the alternatives were not fully
understood. AC agreed that when the matter
was returned to the Board that the team would
include this analysis.
Strictly Confidential Page 7 of 9
N
ND
POL-BSFF-138-0000004_0029
Post Office Limited Board Actions as at 27.10.2022
POL00458418
POL00458418
25.
9.3 Inquiry — Opening
Statement
a)
BF advised that the other point was that we
stated the Board and executives had spent
significant time watching footage of the human
impact hearings. ACTION BF knew that
significant time had been invested in this activity
however he would recirculate links to YouTube.
Ben Foat
Fintan Canavan checked the oral version o
the opening statement to make sure it is
reflected appropriately. The links were
circulated to the Board on 21% October
2022.
Post Office Horizon IT Inquiry - YouTube —
has a slight delay.
The Inquiry has provided us with the
below link to enable Core Participants to.
watch the live stream of the hearing:
https://rts-
av.200m.us/j/93407725295?pwd=UDhuUGI
ZibjJIVzcOR29hdn14Z1I0dz09 The passcode
is PY4EUWCKt
To Close
26.
9.3 Inquiry - Opening
Statement
b)
BT advised that the HMU team had made really
good progress on this and that up to 97% of
potential appellants had been contacted.
ACTION KG asked
Simon Recaldin
10/10/2022: Simon Recaldin and the POL
legal team provided Kate Gallafent with
To Close
27.
9.3 Inquiry - Opening
Statement
¢)
ACTION LH advised that she would like to
understand how other Board members could
attend sessions at the Inquiry. BF advised that he
would circulate details. KG advised that
Ben Foat
Email circulated to Board members on 07"
October 2022 with details. Subject: InquiryI
Hearing - POHIT - Opening Statements
Next Week.
To Close
28.
11.1 Health & Safety Report
ACTION EJ noted the revised approach in relation
to Covid set out in the Report and queried
whether this was going to be shared with
Postmasters. AC advised that it would be.
‘Al Cameron/ Martin
Hopcroft/ Martin
Roberts
Latest Board Report update: Government
guidance advises that Covid 19 is now part
of our everyday lives and will be for the
foreseeable future. We took additional
steps to adapt to this new normal and
treat Covid 19 in the same way we would
treat any other respiratory illness. We will
monitor the rates of infection in POL and
society and will remind colleagues to
follow good practice.
To Close
Strictly Confidential
Page 8 of 9
POL-BSFF-138-0000004_0030
POL00458418
POL00458418
Post Office Limited Board Actions as at 27.10.2022
MH reaching out to Elliot and Saf to share
our plan to communicate good practice as
part of a Winter health campaign and
signpost to a new ‘health advice and
guidance’ resource developed by the
Occupational Health provider.
Strictly Confidential Page 9 of 9
N
ND
POL-BSFF-138-0000004_0031
POL00458418
POL00458418
Tab 4 CEO Report
@
POST OFFICE LIMITED
BOARD REPORT
Title: Chief Executive’s Report Meeting Date: I 015 November 2022
Author: Nick Read, Group CEO Sponsor: N/A
CEO Introduction
The financial half year is always a useful opportunity for reflection and this year, more so
than in any of my previous 3 years, I find myself describing a very mixed picture.
Looking back, our Hi performance has been
delighted that we made a trading profit of I
ong - even better than expected. I
ich_was well above budget and :«
NT, particularly robust
performances across our Banking, Payments and Travel businesses have more than offset
this. Meanwhile, though Postmasters have felt the impact of weaker Mails trading, the
diverse nature of their product portfolio, combined with our August package of support,
means remuneration remains on track — and indeed is‘ up on last year’s H1. We have
controlled our costs well across the business and, we are also starting to see tangible
evidence of tighter legal cost management. Finally, our network numbers are also forecast
to end October at over 11,680 — which is the highest figure in nearly eight years. Churn is
also at its lowest level since Independence. Beyond our financial performance alone, we
have also made significant progress in delivering on our strategic priorities for the year:
. Improving Branch Profitability: Our package of measures in August,
featuring higher deposit rates, equated to an average increase in
remuneration of 5% per branch. At the same time, we are focused on
onboarding new Mails partners, including DHL most recently, as a means of
diversifying our Mails offering and creating new revenue streams. Looking
ahead, we are exploring how to ensure Post Offices are included in any
extension of the Energy Bill Relief Scheme (EBRS) for SMEs, due to end in
March 2023.
. Transforming our technology: Even as we continue to improve Horizon, we
have successfully launched Release 1 of our pilot of our New Branch IT (NBIT),
which covers drop capability. Piloted in our DMBs in Aldwych and St John’s,
this is a major milestone and initial feedback has been positive. While we
should not overstate progress at this early stage, it is a significant milestone
and, importantly, NBIT is now out and live in the network, receiving user
feedback and completing real customer transactions.
. Rebuilding Trust: We are making good progress with the Historical Shortfall
Scheme and are on track to have made 85% of offers by the end of October —
and meet 95% of offers by the end of the calendar year. At the same time, we
have made important progress with delivering full and final compensation to
those with overturned historical convictions, having settled in two important
cases that open the pathway to other cases.
In spite of a challenging retail landscape and turbulent economic conditions, together these
achievements reflect a genuinely positive story for the business in H1 of which we can be
proud.
Looking ahead to H2, the landscape is much less clear; there is an unusual dislocation
between trends we have experienced to date this year and the trends we are facing into.
Needless to say, the cost of living crisis - alongside wider turmoil — is casting a
POL Board Meeting-01/11/22 33 of 134
POL-BSFF-138-0000004_0032
POL00458418
POL00458418
Tab 4 CEO Report
considerable shadow of uncertainty that will, in all likelihood, mean dampened Christmas
trading. With 19 strike days planned for Royal Mail before the end of the year, and likely
more for Post Office, we can also expect significant disruption across the network — with
potentially long-lasting effects on consumer behaviours. I spoke with Simon Thompson last
week and he was unwavering in his determination to stand firm. RMG are prepared to dig
in through the winter and we will need to work hard to protect and support our
Postmasters in Mails. We are already seeing large customers desert RMG (and us) and 1
fear the early November strikes will be material for both businesses.
The recent start of Phase II of the Inquiry has also left me with two key reflections about
the months ahead. First is the intense focus we can expect on our culture as a business —
whether we have changed, but also how we have done so. Second, and no less important,
will be the close scrutiny on rolling out our NBIT programme, given our historic failures to
train and onboard Postmasters to use Horizon successfully. This sets a high expectation for
both in a year’s time - just as we reach the zenith of the Inquiry with phases 6 & 7. Both
the Inquiry and its attending scrutiny on our business will demand considerable cross-
organisation focus and resource over the next two years, having, inevitably, wider financial
implications for our revised Three Year Plan.
It is against this backdrop that we will bring back our revised Three Year plan in December.
A plan that will require shareholder approval in the New Year. This is a cause for concern.
We know that the Spending Review settlement left no contingency nor flexibility to manage
risk and set out a number of challenging conditions related to our network obligations, the
delivery of SPM and the need to bring down legal costs. Despite good progress in all three
of these areas, risk is starting to materialise. The Mails business will continue to deteriorate
over the three year period at a faster trajectory than planned. Postmasters continue to
suffer remuneration pressures, a cost of living crisis and wider cost inflation. NBIT is
moving forwards but Inflation, costs, resourcing and scope challenges present difficult
headwinds. The Inquiry, following costly delays, has now started phase II, but we can
expect it to extend into 2024 with all the associated cost and increased delivery
expectations.
Notwithstanding this I am committed to delivering a Three Year plan that shows how POL
can operate within the funding envelope made available by BEIS in the Spending Review. It
is however unlikely that this will be my recommended plan. The only way to meet this
budget settlement is to make deep cuts to costs at a time when I, and the Inquiry, believe
we need to be building capability, by exiting loss making post offices and by reducing our
investments to the point that, in particular, our network obligations and technology
resilience will be vulnerable. Clearly there will be much to debate in December.
REPORT
{ Finance ]
Financial Performance
1. In P6, the business made a trading loss of better than budget.
of the improvement was delivered b rom lower costs, some
from timing. We believe the FRES upside to be due ‘to postponed tra
currency buy: ith a falling pound. Mails remains the concern,
below budget YTD). Separately, we have started to accrue for the
for wages from (accrued for 1 month
2. In the year to date (YTD), trading profit is n budget. This includes the
of one-off Postmaster remuneration, which include:
higher deposit remuneration, effective as of September
annualised impact of ) and a higher pay settlement
Confidential
34 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0033
POL00458418
POL00458418
Tab 4 CEO Report
3. Remuneration fell below P6 budget by f but is higher than budget
YTD. Weak Mails trading has brought remuneration back to budget, other than
for the one-off payments. Overall YTD remuneration i year-on-year.
Wider Updates
5. Forecasts for H2 suggest that we will end the year: above budget, primarily
as a result of higher expectations from Bol. We are continuing to work through
the forecasts, challenging the business to hold costs down. Given the
uncertainties with Royal Mail, Christmas and costs for the Inquiry, we will not be
in a position to consider higher Postmaster remuneration until the New Year.
6. We are working through the proposals to bring back the headroom deficit in the
3YP. The main stress points are the combined NBIT-Belfast Exit-Device 2 costs
including a physical roll-out during an Inquiry and, the Inquiry itself.
{ Commercial I
Mails, Parcels & Retail
7. YTD (to W28) trading revenue is i
stamps) i
in Volumes YoY driven by small parcels. We have recently seen a
bigger shift from 1st class to 2nd class due to the cost of living and strike
impacts. Special Delivery (SD) has.also been. impacted by strike action, with the
penetration rate dropping from} ELE
8. Turning to PUDO, the network has expanded to 7 7319 branches offering “Click &
Collect” services for Amazon or DPD (or both). Amazon Returns trial has started
well with strong customer demand. A further 1,000 branches will be deployed in
Q4 2022/23, followed by a further 4,000 by end of Q1 2023/24. Meanwhile, DPD
Ireland and DHL technical integration is progressing, with both expected to soft
launch prior to Christmas.
CWU is disrupting trading, with an impact on strike days
he biggest operational risk is driven by RMG'‘s inability
ranches, albeit the top c.2,000 branches are being
serviced when feasible through RM’'s strike contingency and SD is being
prioritised. Consecutive days of Industrial Action are posing the biggest challenge
with 20-30 branches having to stop trading due to space constraints.
10. Further strike dates have been confirmed, with 3 in October and 16 announced
for November. RMG is planning short-term cost efficiencies through an estimated
reduction of c.5,000 operational roles by next March and up to 10,000 by
August. Major strike disruption is expected during peak. RMG’s future appears
uncertain, with parent company IDS Plc considering selling its profitable
international division (GLS).
11. Looking ahead, we are progressing the business case to implement a solution for
digital international customs data capture in branch in line with EU customs and
regulation changes in March 2023. Finally, we are working with RMG to
implement a Tracked 24/48 service in-branch in time for the new financial year.
Banking, Payments and Transactional Products
12. Banking continues its strong performance, with over ii
branches in September - slightly less than August, impacted by the Queen’s
Confidential
POL Board Meeting-01/11/22 35 of 134
POL-BSFF-138-0000004_0034
POL00458418
POL00458418
Tab 4 CEO Report
passing. Banking Hubs continue to develop well, with three on track go live
before Christmas. We continue to assess the various ‘waves’ now coming through
that will see a much higher number under contract into 2023. The Enhanced Post
Office (EPO) concept is progressing well in discussions with the Operating
Company.
13. Meanwhile, Payments revenue continues to exceed budget, with a major
expansion of the successful voucher scheme now starting to bring higher footfall
into branches.
14. Travel Money continues to perform well ahead of budget. Having resolved
technical issues with Western Union, we have brought forward the go-live date
for the roll-out of the new service, by the end of November, into a handful of
DMBs. Wider roll-out will take place from January 2023.
15. Due to Security Service concerns over money laundering, the FCA has written to
all banks to impose various deposit limits. The banks are unwilling to impose
limits that will prevent their customers from trading easily. We have escalated
this issue to MPs. UK Finance and bank senior staff are pressing for Ministerial
briefings to ensure the access to cash angle is pushed hard. We are collating real
consumer impact stories to provide data evidence.
Platform Products
16. Overall platform pri
Ireland (Bol) deal {
interest rate environment. August
latest BoI forecast) and our forecast
revenue.
the Bank of
IRRELEVANT
17. In insurance, P5 and P6 were slightly behind forecast for Travel Insurance as the
seasonal decline was greater than hoped, but P7 is running ahead of our more
cautious H2 forecast. The Q3 Protection (Life Insurance) campaign has recovered
well from the hiatus caused by withdrawal of advertising following the death of
the Queen. The POI Board will sign off our plans for new consumer duty rules in
October, as required by the FCA. We are making good progress on the regulatory
programme to ensure we are compliant.
18. The interest rate and swap rate environment is creating uncertainty and
challenges in the savings and mortgage market. We are in a cycle of regular re-
pricing of both lending and savings products. Rising interest rates have
generated increased commission forecasts.
19. Credit Card sales are slowing as Capital One’
‘Voratility of Salés as it moves in and out of credit risk segments ¢ over the coming
months.
Retail, Lottery & Government Services __
20. Lottery is performing in line with budget (I
forecast with a small boost seen from EuroMillions. Total sales ar
scratch cards continuing to underperform. Following initial engagement with
Allwyn, we are reviewing technical and commercial options around the
continuation of delivering these services. The L4 Lottery Licence transition
coincides with our NBIT roadmap and timelines.
Confidential
36 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0035
POL00458418
POL00458418
Tab 4 CEO Report
22.
233
Blackhawk related to removal of One4All exclusivity.
Government Services is:
performance, led by DVLA.
this has been offset by a strong performance in UK Visa & Immigration Secure
Card Collect as the surge from international students has yielded record volumes
vs budget YTD. We continue market engagement with
Crown Commercial Services around the scope of services to be included in the
new Government Services framework.
as a result of strong product
Lottery full-year performance is dependent on rollovers in EuroMillions and Lotto
draws in H2, but the cost of living crisis continues to have an impact on
discretionary spend.
Customer Experience
24.
25.
Our new “We Can Help With That” brand messaging launched internally with
positive feedback and will launch externally on 7 November as part of Christmas
peak. Christmas marketing activity launches on 7 November.
The “Let’s Talk Mails” campaign engaging Area Managers has concluded, with
visited branches having increased penetration across almost all measures,
including Drop & Go and Special Delivery. Meanwhile, the “Cash in Travel”
campaign with Postmasters is now live, offering a short-term increase in
remuneration on Travel Money Card (Oct - November), fully funded by FRES.
[ Postmaster & Network ]
Network coverage and Drop & Collect roll-out
26.
27.
Network numbers grew from 11,600 to 11,632 in September, and we are
forecasting to end October at over 11,680, the highest figure in nearly eight
years. This strong position is driven by a combination of favourable churn levels
and the acceleration of the Drop & Collect roll-out. As of 17th October, we had
reached 70 D&C locations and we remain on track to deliver 100 by end October.
This progress puts us in a strong position to manage the expected increase in
churn rates in Q4 (including 59 McColl’s closures) and provides the headroom to
start tackling loss-making branches as part of our broader network strategy.
Back Office Postmaster Service & Support
28.
29.
30.
Branch Support Centre (BSC) service dropped in P5 with only 40% of calls
answered within 60 seconds (vs target of 70%). This reflects the ongoing
resourcing issues, coupled with high levels of sickness within the team. Five new
starters will begin in October, with a further five starting in November.
Postmaster satisfaction remains high however at 87.2%.
Plans are in place to ensure we provide the best service over the peak period.
Emergency stock ordering calls will divert to the Bristol Cash centre by the end of
October enabling BSC colleagues to focus on other more complex queries. An
additional team of 11 experienced colleagues from within Retail will support with
calls over this period.
Aged Open Items are down 29% on P5 at 3,184 as the team continue to
manually clear cases created by the recent debit card issues. Performance on
discrepancy investigations has also remained strong in P6, with 94% of cases
resolved within SLA.
Confidential
POL Board Meeting-01/11/22 37 of 134
POL-BSFF-138-0000004_0036
POL00458418
POL00458418
Tab 4 CEO Report
Postmaster Engagement
31. Following the August business update, we have continued to monitor sentiment
around remuneration improvements. During the weeks following the business
update, there was a steady stream of Postmaster correspondence directly into
me. 112 letters have been received, with the flow tailing off in recent weeks. The
majority focus on key themes of the cost-of-living crisis, increased fuel costs and
overall profitability of their branches.
32. Whist there is some negative sentiment generated by a small group of
Postmasters, and fuelled by both the NFSP and the newly formed Voice of
Postmaster group, many Postmasters are more positive about the news —
including Regional Forum members and Strategic Partners. Ongoing engagement
with Postmasters continues via our Regional Forums, NFSP regional meetings
and regular contact with 40 Postmaster ‘influencers’.
33. The Voice of Postmaster group have become more organised over recent weeks
and have established themselves as a ‘constitution’, appointing formal roles to
members such as Chair and Vice Chair. They now have close to 700 members on
their Facebook group. Martin Roberts, Tracy Marshall and Hithendra Cheetirala
met with 8 members of the group on 3rd October to listen to their concerns,
which largely revolve around the cost of living crisis, remuneration, the lack of
communication from Post Office, and the NFSP.
34. The NFSP voiced their strong opposition to the meeting with representatives from
the VOP group, citing this as a breach of Postmaster contracts. As such, they
have invoked clause 31 of the Grant Funding Agreement, involving a three-stage
escalation process. Following conversations with Calum Greenhow over recent
days we are confident that this escalation process will go no further. Discussions
are ongoing with the NFSP regarding the signing of the Grant Fund Agreement -
one outstanding issue remains around the treatment of VAT.
35. In the meantime, we plan to engage Postmasters via a business update on 10th
November. Due to the current business funding position, we will not be
announcing improvements to remuneration, which will be disappointing for many
Postmasters. A careful approach to communications and engagement is
underway to manage Postmaster expectations in advance, agree core messaging
for the update and manage feedback.
Wider Postmaster Engagement
36. New postmaster satisfaction with the onboarding journey has again improved
and now stands at 82%. The average time taken to onboard a Postmaster has
reduced slightly month-on-month to 148 days, a reduction of two weeks on the
previous period. We have put in place a target to complete the overall
onboarding journey (application to contract signature) in just 12 weeks.
37. The average time taken for Postmasters to submit their application and provide
supporting documentation currently stands at 93 days alone. Work continues to
review the support provided during this stage to enable reduced overall
timescales.
38. Overall satisfaction with training support continues to score highly with just over
95% of Postmasters feeling confident after both their e-learning and classroom
training.
Retail Field Teams
39. Our peak planning continues via a cross-functional working group, which will be
shifting to daily stand-ups from mid-November. The sign-up process for
Confidential
38 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0037
POL00458418
POL00458418
Tab 4 CEO Report
40.
41.
42.
Strategic Partnerships (SPs)
A challenging trading period for Strategic Partners throughout P6.
43.
44,
45.
46.
47.
‘and the aReLe § Funeral. YTD SPs ar
Christmas Helpers to support in branch or in the Customer Services Team has
been communicated to the business.
The primary focus continues to be on ensuring that Postmasters and Partner
branches are set up to maximise the Christmas opportunity. 7,080 visits have
been carried out as part of our ‘Let’s Talk about Mails’ campaign, providing sales
coaching of Mails alongside product knowledge training. High volume branches
will be revisited during October and November.
Supporting the PUDO programme remains a major focus for the field team,
including tackling the remaining non-active Amazon devices and commencing the
rollout of Amazon Returns in up to 1,000 branches pre-peak.
We are recruiting for new members to join our Regional Forums, which were set
up so that Postmasters could raise day to day operational issues which impact
the way they run their branches.
industrial action
‘I There is the
risk of ongoing IA throughout October and November having a continued
negative impact on the YTD position vs target.
I driven b th t of thi
McColls and OneStop both had negative performances for the period, meaning
they are now just on target YTD. Our focus is therefore on getting traction with
these partners to drive performance back up for H2. The trading issues in
OneStop are predominantly driven by reduced hours/closures and the greater
impact of mails due to their product proposition. This is being addressed in a
joint retail action plan.
McColls are slow across the board with marked footfall decline being seen since
entering administration. We are working with the Morrisons team to identify what
interventions can be deployed. They are very receptive to this and will be
introducing a joint Christmas marketing campaign to support performance. Good
In response to the investigation ‘by the CMA of Morrisons’ purchase of McColl’s,
Morrisons have now offered to divest 28 McColl’s stores (20 have Post Office
branches) to a purchaser or purchasers to be approved by CMA. The CMA is now
consulting on these proposals and, should they be accepted, the deal will be
cleared to proceed. Morrisons have a target of end October for settlement of the
estate. A small team from POL continue to work under strict confidentiality
provisions to understand the scale of the closure of unprofitable McColls stores.
It is expected that up to c60 stores with PO branches may close and so guidance
is being provided to Morrisons of the PR that will be required.
The Strategic Partner Forum was held at the end of the period with a focus on
Christmas. A great session supported by the Mails and marketing teams means
we have launched Christmas early this year.
Supply Chain
48.
Cash processing returns hit a new peak of £575m in week 28, driven by the
month end impact and recovery from industrial action. All work was processed
in-house but required 7 days working. The average over the last 28 weeks is now
at £454m and could exceed the revised forecast of £461m at year end. We
Confidential
POL Board Meeting-01/11/22 39 of 134
POL-BSFF-138-0000004_0038
POL00458418
POL00458418
Tab 4 CEO Report
utilised Nat West to process £45m during w/c 5th September when inflows hit
£545m.
49. 88.2% of available deposits were processed on Day A in cash centres, which is -
10% points from last period, though productivity was slightly up and remains
ahead of target.
50. Cash in Transit achieved QofS of 93.3% when adjusted for impact of industrial
action — a decline of 2% on last period, with high volumes, the bank holiday and
absences presenting challenges. Meanwhile, Cash Management call centre
customer satisfaction was at 91.3% (vs 85.6% target) and 55.5% of calls were
answered within 30 seconds (vs 80% target). Stock availability was at 99.2%
(vs 96% target) and accuracy at 99.6% (vs. 99% target).
[ Strategy & Transformation (HMU) I
BEIS Policy Review
51. Work on the BEIS policy review continues and BEIS have now held their first
workshop with us on their preliminary thinking around options for future network
policy. This looked at a wide range of potential ideas to help guide their work and
over the coming weeks we will be sharing our considered views on these - i.e.
the benefits of each policy framework to POL, and the cost and time required to
effect the required change.
52. An accelerated design workshop or ‘Ignition Session’ has been arranged with
BEIS and UKGI, facilitated by KPMG, in early December that will help to build on
this. BEIS have indicated that they plan to announce the review end-October /
early-November and we will have an opportunity to comment on any public
statement. An announcement also means we can start engaging with selected
external stakeholders.
Change & Transformation
53. As part of the three year planning activit
has been st esenting a I. i
forecast of i (excluding HMU and Inquiry, Bex and NBIT). This was diready
56% lower th. r recommended plan that we put to BEIS in August 2021. The
feasibility of achieving this target will be discussed at the Board, as will the risks
associated with cuts at this level.
54, The latest business view of the 3YP change spend is
Inquiry, BEx and NBIT) and this incorporates around £51m of the £75m
challenge outlined above. Work is ongoing to identify further areas of savings
and build alignment on these with the busi The latest view of the 3YP
change spend, including all activity, i
55. At the end of P6, o
HMU Settlement),
the portfolios. Many ai
for active projects was I
{ Historical Matters Unit (HMU) I
active projects was (excl.
_, due to various movements across
ings. P6 YTD incremental benefits
Criminal Appeal Cases
56. The number of overturned historical convictions is currently 81, comprising 64
overturned by the Court of Appeal Criminal Division (CACD) and 17 conceded at
Southwark Crown Court. Within the Southwark cohort, one is a Crown
Prosecution Service conviction.
Confidential
40 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0039
Tab 4 CE
POL00458418
POL00458418
Siw
58.
The Criminal Cases Review Commission is considering 31 cases, including 27
Post Office-prosecuted cases that may have relied on Horizon data, 3 non-Post
Office prosecuted cases and 1 case in which the identity of the prosecutor is
unknown due to lack of papers.
One case is likely to be referred by the CCRC soon and Hudgell has informed
Peters & Peters of an imminent appeal to the CACD. On initial review, we are
likely to concede both.
Historical Shortfall Scheme (HSS)
59.
60.
61.
We are on course to meet the external target of 85% of offers by October end,
however there is a challenge to meet the internal stretch target of 95%. All
efforts are being made to meet this target, including the resolution of challenging
populations such as Insolvency and Harassment. Given these the complexity,
HRC have been advised that the stretch target is likely to be delivered by the end
of November, still ahead of the external target of 90%.
The 5% of remaining cases are likely to be difficult and a review of all of these is
currently underway to enable delivery in a timely manner. There are a number of
key difficulties in these claims including Malicious Prosecutions and Assistant
Convictions.
Funding for Late Applications to HSS has now been agreed with BEIS and we will
now proceed to process these, subject to HSF agreeing to using the HSS
processes with the Independent Advisory Panel continuing their role in
recommending settlement amounts.
Overturned Historical Convictions (OHC)
62.
63.
Work continues to ensure all claims are progressed as quickly as possible, in
particular progressing the non-pecuniary claims, and are being settled in a timely
fashion.
An update paper on the options for the OHC Compensation Process was
presented to HRC on 30 September. This updates on the ongoing relationship
with HSF, cost options, and principles on how the transition process from a
negotiated to a remediated solution will operate. Further detail will be presented
on 27 October.
Postmaster Detriment
64,
65.
On suspension payments, funding has yet to be confirmed by BEIS and will not
be available until the Funding Commitment Letter and Operations Agreement are
finalised. Linklaters are preparing the former in respect to unpaid suspension
fees and associated consequential loss. The latter has been written and is in the
feedback process with UKGI/BEIS. HMU have confirmed the remediation
approach when Postmasters do not accept an offer and elect to submit an
alternative consequential loss claim.
On outstanding balances, legal advice
HRC have asked for information on how the unreconciled balances arose,
as well as for more detailed information on the position of those Postmasters
currently making repayments. Funding conversations are ongoing with
UKGI/BEIS and a productive meeting took place on the way forward. A further
paper will be presented to HRC in October.
Confidential
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0040
POL00458418
POL00458418
Tab 4 CEO Report
Cost Challenge
66. A paper responding to the cost challenge to reduce costs by £35m against
forecast, in the period to 31st March 2025, was presented to HRC on 30th
September. All areas of HMU are challenged with reviewing processes, including,
for example, consideration of a remediated approach to OHC claimants and
processing Late Applications in-house.
67. Cost modelling on Claimant Volumes is also being undertaken to establish
variable costs. To deliver the £35m will entail significant restructuring, changes
to policies and a significantly adjusted risk appetite.
[Inquiry
Phase II Hearings
68. We submitted our written submission on time and the expanded oral submissions
were agreed, responding in part to the other Core Participants’ (CPs) written
submissions. An application was made by the SPM CPs to adjourn the start of
the hearings. This was refused and the hearings began on 18th October with two
days of evidence from the IT expert for the Inquiry.
69. As yet only one existing employee has been called to give evidence. To date, five
current POL employees have been asked to prepare a witness statement relating
to Phases 2-4. We continue to work with former employees to facilitate access to
legal advice.
70. The Inquiry will sit four days per week. A schedule of the witnesses has been
published and we are maintaining a Sharepoint with the witnesses and Post
Office team attending each day. We share the same with GE and Board to
facilitate attendance by them or their direct reports. We encourage attendance
to assist in understanding the process but mainly to show that Post Office are
engaged and listening.
71. A further date to update the Chair on progress against the compensation issues
and targets has been set for the 8th December. In the meantime, HMU will
continue to challenge BEIS/UKGI to work at greater pace to ensure progress is
made across all key areas. A written submission to the Inquiry on Compensation
has been filed by K Gallafent KC on behalf of POL.
Wider Updates
72. Rule 9 requests: To date, we have received 24 requests for documents. We
continue to respond, and no suggestion of a section 21 notice to compel
disclosure has arisen.
73. Disclosure issues: We are providing a second Interim Disclosure Statement to
give further assurance of our compliance with the disclosure requests and to
detail the data universe, hard copy repositories and our work to rationalise,
search and retrieve all responsive material in response to R9 requests. We have
also completed the review of files located in Winchester and have updated the
Inquiry on the material disclosed (no further material related to Phase 2). There
are 17,000 relevant files and a sample test of 500 files returned around 4%
potentially responsive material but not related to Phase 2.
74, Financial update and budget restrictions: Funding remains an issue while we
seek clarity on the extent of funding available. This should be resolved at
December Board. Our preparation for future phases has been limited while the
financial issues are resolved.
10
Confidential
42 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0041
POL00458418
POL00458418
Tab 4 CEO Report
[ Technology (see separate Board Paper for SPM / NBIT update)
Core Service Performance
75.
76.
TW
78.
79.
At the height of our printer issues, our focus was on reducing the volume of
branches that are unable to trade for technical reasons (so called “Branch
Downs”). In August, we peaked at 185 branch downs, with 95% of those due to
our lack of printer stock.
We deployed a new, multi-pronged approach, including twice daily meetings with
our suppliers and introducing a small “Branch Availability” unit to guide or
support suppliers. At end of September, there were 30 branches unable to trade
for Technology reasons, with 80% of incidents reported resolved within 48 hours.
560 new printers have now been received and are being deployed to branches.
This addresses c.30% of the backlog. With another 1000+ new printers expected
in coming weeks, we confidently anticipate to close out remaining printer issues
pre-peak trading.
From a high of c.150-180 branches down per day, we are now steadily under 30,
which matches historic performance. Work is underway to assess how we can go
below 20.
There were 5 Technology Major Incidents (MI) in September - a slight increase
compared to August but lower that our monthly average. Four directly impacted
branch services:
i. Due to issues with Credence, Lottery Transaction Acknowledgments were
sent out with the wrong signage, sending Branches into a negative stock
position;
ii. Security Industry Authority (SIA) transactions were unavailable due to
issues in SIA’s own data centre, external to Post Office;
iii. 487 branches were unable to process energy transactions through
PayStation devices due to a Worldline issue, external to Post Office;
iv. A mismatch of HMRC Branch Fit and Proper registrations due to data
reporting issues in Arrow, another one of our legacy data systems;
IT Service Desk (ITSD) Performance
80.
81.
82.
ITSD has now been in Technology for 3 months, having been moved across
following major challenges with printers, branches unable to trade and low
morale. Overall, the performance of ITSD is showing incremental improvements.
We have seen call volumes decrease by 15% in September (vs August), and the
first-time fix rate slightly improved to 36%. Team morale is slowly improving
now that there are credible plans to remediate issues. Average wait times were
slightly longer due to low numbers of agents taking calls (e.g. one Friday had
nearly 50% sickness rate) and the increase in MIs outlined above.
Call volumes have dropped by 15% to c.8k, thanks to resolving printer issues
(August: 9.4k; July: 12.4k; May: 10.5k), though the main drivers of demand
related to Branch Hardware. Notably, 72% of calls in P6 were to log a new
incident (vs. repeat callers), down 5% from our last update. Together with the
decline in total calls, this suggests that incidents are being resolved at a higher
quality and more quickly.
72% of calls were answered, with 28% calls abandoned. Average wait time was
c.10 mins, slightly more than previous months (c.8 mins). 72% of incidents
11
Confidential
POL Board Meeting-01/11/22 43 of 134
POL-BSFF-138-0000004_0042
POL00458418
POL00458418
Tab 4 CEO Report
were raised via phone — a 5% drop from last month. 27% of Incidents were
raised by Self-Service, which continues the positive increase of reporting via
BranchHub (vs 18% last month). We still have challenges converting our network
and colleagues to contact us via BranchHub or our Colleague portal.
83. The Service Desk remains materially down on headcount compared to the
numbers needed to handle our call volumes and first-time fix goals. We have 16
agents taking calls but with rotas/holiday/sick we're averaging 12 each day.
Attrition remains high, so rapid recruitment remains the critical component to
improving service levels. We also need to make the role more commercially
competitive to attract the right talent as we're in direct competition with a
number of other local organisations.
Cyber Security
84. Cyber-attacks remain on the rise, with many organisations announcing that they
have been ‘hit’ this year, including SPAR and Yodel. We continue to operate on a
heightened alert.
85. Throughout August and September, we introduced new Data Loss Prevention
(DLP) policies for colleague email accounts. We also onboarded additional web
application monitoring tools. This has led to improved visibility and maturity of
our Cyber Security operations, but it meant an uplift trend in security incidents
as a result of this visibility.
86. The total number of security incidents raised in September was 879. Most are
closed, only two require further investigation. All other historic tickets are now
closed. Average time to resolve security incidents was c.16hrs. While this is very
high compared to industry, it reflects the fact that our Security Operations
Centre does not operate 24 hours per day.
87. Some additional highlights from the Cyber Security space:
i. Additional security resources have been shifted to supporting the NBIT
programme, aiming at improving the overall security posture of the
emerging platform. A team has been launched to pressure-test the cyber
security of NBIT, operating independently and without the knowledge of the
platform/programme it is testing.
ii. We are renewing our Cyber insurance policy. The costs are set to increase
significantly, reflecting overall global risk levels. However, following
engagement with brokers, we received positive feedback and hope to
contain the cost increase.
iii. Our Ransomware programme has been launched. We expect to invest
significant management time and resources in this programme.
iv. Work with Fujitsu continues to reduce its privileges to the Horizon Counter
for support purposes. We entered Model Office Testing (one of the final
gates) on 31st October.
Horizon Operations
88. The 2023 schedule for new Horizon Application Releases has been agreed and
socialised to all parties, including a re-focus of the route to live tasks.
89. The team resumed Continual Service Improvement (CSI) activity, after a break
while focus was on dealing with the counter printer issues. A number of ongoing
and proposed improvements have been identified, and will be reported on a
monthly basis.
12
Confidential
44 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0043
POL00458418
POL00458418
Tab 4 CEO Report
90.
‘91.
92.
Elsewhere, a first draft of the Defects Dashboard is now completed and under
broader review. Release of the current defects within recovery script project is
now complete and can now be recorded in service now for full transparency.
On HIJ remediation, discussions on scope and funding for the final phase remain
ongoing and are subject to review based on emerging Inquiry themes. Current
anticipated scope is progressing with design work for candidate Horizon
improvements, Branch Reporting Suite and enhanced Horizon Browser (to enable
Branch Hub at the counter) well progressed. Work to commission audit of
privileged and remote access, plus additional assurance on transactional integrity
to commence later in October.
Horizon-to-NBIT Bridge: Data has been provided to the SPM / NBIT teams to
assist with their design for the new counter application, including stats on access
to Horizon Help pages, and analysis of 12 months’ transactions by counter.
People
Organisational Design
93.
94.
In Retail, the Retail Operations Director joined on 26 September and the Central
Operations Director joined on the 17 October. This means Retail’s Leadership
Team is complete.
In July 2022 we launched a policy for new contractor engagements. We had
planned to review our existing contractor determination following the transition
to a new managed service provider in December 2022. This was put on hold in
line with the announcement of the off-payroll workers regulations repeal in
September 2022, which was then reversed on 17 October 2022. This activity will
be revisited.
Culture & Engagement
95.
96.
97.
The Engagement survey has closed with a low participation rate of 36% due toa
successful campaign by the CWU asking their members to boycott. Result
dashboards will be available 21 November, at which point we will start action
planning.
Workplace champions for the move from Finsbury Dials are in place and have
attended several workshops for the new HQ design and our future Ways of
Working.
The programme to support witnesses and their families in responding to the Post
Office Inquiry continues with the support of Optima Health. This includes a
dedicated helpline and workshops for witnesses, as well as line managers on they
can support witnesses.
Talent, Diversity & Inclusion
98.
99.
We have provision for 100 “360 Feedback” assessments to take place across the
leadership population, starting with GE. Executive coaching provision has also
started for some top talent SLP members. A SLP talent review will take place in
November to inform further decisions on investment in development to ensure
we retain and develop talent.
The Remuneration Committee has approved a trial award of 2022/25 LTIP grants
at 10% of salary for talent below SLG. Talent reviews will validate the Band 4
and 3A talent to be nominated for the award. The trial’s success will be
determined by the retention and performance of those involved. We intend to
13
Confidential
POL Board Meeting-01/11/22 45 of 134
POL-BSFF-138-0000004_0044
Tab 4 CEO Report
POL00458418
POL00458418
100.
101.
102.
make awards in November 2022 with the awards maturing, subject to achieving
LTIP targets, for payment in August 2025.
A Request for Proposal (RFP) has started to select a new recruitment partner to
support our next graduate scheme. Plans are in place to introduce Commercial,
Retail and Technology specific schemes to support with emerging talent and
future operating models.
The Equity, Diversity & Inclusion Survey results were released on 19 October.
Key themes and areas for improvement include recruitment process, career
progression, improving communications and additional focus on disability.
We are progressing well on our ethnic minority representation within the
organisation - apart from at GE. Gender balance needs more focus and we'll be
introducing fast track development programmes to support this. We've partnered
with Diversity in Retail and will trial participating in their Ethnic Future Leader
and Female Future Leader programmes.
Wider Updates
103.
104.
105.
106.
Reward & Recognition: Turnover remains below 10% YTD and the payment of
bonuses in August to 1,350 colleagues did not trigger an elevated level of exits.
There is an increase in requests for colleagues seeking ad hoc pay adjustments
(in the population above union grades) against the backdrop of no pay change
for 2+ years. Total Reward Statements will be issued to the bonus eligible
population in November 2022.
CWU Pay Dispute: The CWU mandate period to take industrial action expired
on 28 September. We have received notification that they intend to undertake a
new ballot to enable them to call further strikes in December. Our strategy is to
try to ensure that CWU does not receive a further strike mandate from their
members by reiterating that our 5% plus £500 lump sum pay offer is our best
and final offer and strikes will not be effective in changing that. We will attend
further ACAS talks with CWU to try to breakthrough in talks.
POL Board: The Non-Executive Director advert for the 3 roles is live on the
Government opportunities website. Meanwhile, Green Park are carrying out the
search with the shortlist expected around 14 November 2022
Project Assurance - The Trustee has entered into discussions regarding their
costs for the correction exercise. We have offered £450k in line with the 2015
Administration Agreement. The Trustee has spent materially ahead of that —
c£2.5m and growing - and cost negotiations are underway, running to 30th
November 2022.
14
Confidential
A6 of 134
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0045
Tab 5.1 Financial Performance Report
@
POL00458418
POL00458418
POST OFFICE LIMITED
BOARD REPORT
Title: P6 - Performance Overview Meeting Date: I 1S* November 2022
Navin Batra — Strategic _ -
Author: Financial Planning & Analysis Sponsor: fa Cameron Group Chief
Director Finance Officer
Input Sought
The Board is asked to discuss and note the P6 performance.
Executive Summary
The purpose of this paper is to summarise our Period 6 financial performance, with further
details and analysis provided in the reading room slide-deck.
POL traded at a small loss overall in P6 but remained ahead of budget largely due a higher
FRES profit share and lower overheads.
1. Mails trading revenue was
International. Total Mails
with continued shortfalls on Labels and
14%) YoY vs (11%) in P5. The pressure
from cost of living issues and RMG industrial action pushed most lines below budget for
the month, with Special Delivery down year-on-year for the first time:
Confidential
POL Board Meeting-01/11/22
47 of 134
POL-BSFF-138-0000004_0046
POL00458418
POL00458418
Tab 5.1 Financial Performance Report
2. Travel Money ‘Rey.
profit share was}
backs following a weaker pound.
3. The energy payout rebate scheme delivered
4. Balances on Postmaster accounts increased by j!RRELEVaN he debt provision has increased
in P6, taking YTD losses t over budget.
5. First Advantage (FADV) is delaying its adoption of our Digital Identity solution, now
scheduled for December. FADV is seeking to extend i
branch verification by six months until September 23,
6. YTD Trading Profit is :
than budget for POL and Postmasters. FRES
riven by delayed summer travel and a high level of buy
‘venue upside vs budget.
of unbudgeted one-off payments to Postmaster rem with
the higher deposit rate higher pay rise working through H2 results.
7. YTD Cost of Sales are tof which (!R&Levant! relates to higher card processing
costs driven by travel recovery. Overheads are favourable with unfilled staff
vacancies in H1, lower marketing spend, and delayed project opex. This is forecast to
reverse in H2.
8. YoY Trading Profit is [IRRELEVANT] YTD, with Banking growth and Travel recovery more than
offsetting Mails trading decline. YoY PM Rem ha: in total YTD,
helped by the agreed top ups and Travel recovery. YTD Variable Remuneration currently
stands at 50% of variable revenue, compared to 47% in the prior year. However, the
weak Mails performance means that Postmaster rem is flat to budget YTD without one-
offs.
9. The open network rose to 11,634 branches in September. There are 48 Drop & Collect
branches now live in the network. This is scheduled to grow to 100 by the end of October.
10. Change spend was / IRRELEVANT I budget, whilst settlements paid of
“than budget receiving responses from claiman
in period was I
11. Security Headroom of £ pur forecast. Client payables were
higher than forecast, of which wirelated to uncashed Council Tax Payout prepayments.
We also had c. £20m higher payables across other areas such as expense accruals,
Postmaster payables and Other payables, £23m lower HSS settlements in cash, £4m
better Trading and £2m lower Change spend. These are predominantly timing related,
especially Payout payables and HSS settlements which will be required to be paid out in
future periods. The Energy Bill Support Scheme is now starting, for which POL is being
prefunded by c. £90m each month. This will temporarily boost Security Headroom over
the next 6-9 months.
Confidential
48 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0047
POL00458418
POL00458418
Tab 6 Three Year Strategic Plan
POST OFFICE LIMITED
BOARD REPORT
Title: Closing the 3YP Gap Meeting Date: I 1 November 2022
ATthae Navin Batra, Strategic Financial Sionsave Al Cameron, Group Chief Finance
. Planning & Analysis Director r . Officer
Input Sought
The purpose of this paper is update the Board on our progress in closing the Security
Headroom (SH) gap that was apparent in our draft 3YP. The Board is asked to comment on
the issues and questions raised.
We will revert at the December Board on further progress made and the implications for the
3YP.
Background
Our draft 3YP showed We set out a
hypothesis that we would seek to improve our cashflow over the next two and half years by
IRRELEVANT _ if we are able to borrow to reduce our costs.
Our financial performance shows a SH outcome far better than our forecasts. We believe that
this “better than forecast” performance is due to timing differences that will continue
throughout 2022-23: local authority payouts; the new energy payouts; and rising creditors
that sit outside the formula. We assume that these reverse after this financial year. We will
continue to explore working capital to test this and to identify how we might postpone
payments to creditors in future.
Negative SH is no longer a breach of our contract with HMG but something that requires
correction. However, we will need more support from HMG, whether borrowing, re-purposing
compensation or direct funding. It is evident that any such support will be dependent on our
demonstrating the maximum self-help.
Where are we?
We provide an update below against the initial hypothesis. None of these numbers are final or
agreed by the Executive and there remains a great deal of work to do. This is getting intense
focus and there is real progress in some areas.
The numbers do, however indicate that this is looking more difficult than we thought,
especially in relation to the full roll-out of NBIT and to the costs of the Inquiry. We will
continue to update this as we review, challenge and push, with the aim of bringing an
updated 3YP view to the Board in December for review and approval.
Strictly Confidential
POL Board Meeting-01/11/22 49 of 134
POL-BSFF-138-0000004_0048
POL00458418
POL00458418
Tab 6 Three Year Strategic Plan
@
Updated view of Gap closure plans
IRRELEVANT @
1. The like-for-like technical cost of delivering NBIT has not substantially changed.
However, there are three areas of pressure. We need to fund the roll-out across the PO
network of a second, Payzone device to deliver bill pay. Secondly, we need to finalise
the estimated cost of staying in Belfast to March 2025, migrating specific areas to the
NBIT cloud.
Thirdly and most materially, we believe that we will require a physical roll-out across
2024 that will be more intensive, demanding and expensive than the minimum the
programme could deliver and planned to deliver. For example, it will not be acceptable
for us to follow a standard big programme approach of “yes there are errors but we will
fix them later.” We are currently debating training approaches but we may require a
substantial face to face element.
As noted above, the roll-out has not been agreed and we are debating some 40
que:
5
Strictly Confidential
50 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0049
POL00458418
POL00458418
Tab 6 Three Year Strategic Plan
@
Nnge spend: An initial challenge was set to reduce our change spend by
(excludes HMU, NBIT and Belfast Exit) to /
Tim McInnes is included on the agenda. ubstantial savings are
with substantial risks attached. More work is required to get to
available -
£75m.
3. Reverse increases in historical costs: We had asked HMU and Inquiry teams to revert to
their previous forecasts, saving £35m on HM costs and £12m on the Inquiry. A separate
paper on HM costs is attached. The team under Simon has responded strongly and
agreed a plan with HRC for the first £15m of savings. Re-working OHC, restructuring the
team and moving to a different model are ideas to close the gap. Some of these ideas
are likely to slow the delivery of compensation to an extent that may be unacceptable.
On the Inquiry, we are not yet presenting a paper. The Inquiry team is facing a much
longer Inquiry with additional hearings on compensation. Instinctively it believes that it
would be appropriate to spend over £60-67m against an earlier forecast of £34m and a
3YP submission of £46m. This would include some £30m with HSF.
The team is currently challenging back to ensure that we have put HSF under price
pressure (it reduced its price for late applicants from £15m to £7m), that easier work is
moved to cheaper lawyers and the extent to which we can focus our effort on more
recent issues. However, this is not easy: our reputation is determined by how well we
support the Inquiry.
4. The business is currently working through plans to improve our trading without being
more optimistic (£E25m) and reduce our costs. £55m of cost benefit is assumed for this
3YP period, gross of £20m of redundancy costs. The Executive is undertaking a first
review on 4 November. Capturing this benefit, as with change spend, requires
immediate delivery.
6. Postmaster balances. We have agreed as part of the NBIT roll-out that we will, on the
day of transition, count the cash, stamps and lottery stock with the Postmaster. Those
counted balances will be the opening balances on NBIT and will give us a fighting chance
of demonstrating that NBIT is working and that differences can be explained.
The consequence is that we will therefore crystallise the net impact of all the differences
on Horizon, in many cases going back years. We therefore have to determine how those
balances will be treated. It is important that this conversation happens privately and is
not shared with Postmasters. We are therefore exploring this issue and whether any
amounts written off provide an opportunity to move on from unknown detriment.
Strictly Confidential
POL Board Meeting-01/11/22 of 134
a
POL-BSFF-138-0000004_0050
POL00458418
POL00458418
Tab 7 Revised C
@
POST OFFICE LIMITED
BOARD REPORT
Title: 3YP - Revised Change Spend Meeting Date: I 1 November 2022
7 Tim McInnes, Strategy and 7 Tim McInnes, Strategy and
peli Transformation Director loli Transformation Director
Input Sought: Discussion
Executive Summary
1. As part of the current three year
change spend by:
This paper provides an ve made against
recent weeks, ahead of recommending a final position to the Board in December.
2. To date we have agreement or line of sight on +. and while we
will do what we can to make more progress over the next 4 weeks achieving the target
total will require some very difficult trade-offs. The risks posed by the proposed cuts are
severe and in a number of cases we will not have a robust mitigation strategy in the event
unfavourable circumstances materialise (i.e. we will have no contingency or flexibility to
reallocate funding). The Shareholder and wider stakeholders have an interest in this and
we will be engaging actively with the former ahead of the December Board.
Note: All financials in this paper save for Paragraph 5 refer to the July 4+8 change spend
forecast as this is when the challenge was set. Other Board papers presented today (e.g.
NBIT) refer to our current view of expected spend.
Report
3. In response to the draft three year plan developed over the Summer and as part of POL’s
proposal to close thi Security Headroom gap that resulted from this, a £75m
challenge was allocated to change spend (excl. HMU, Inquiry, NBIT and BEx, which were
either the subject of other challenges or were considered exempt). This represented a
46% pressure against the change spend position outlined in our July 4+8 forecast.
52 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0051
POL00458418
POL00458418
Tab 7 Revised Cha
ge Spend
A
A
m
rT
ls
>
z
—
4. For context it is worth
4+8 forecast was: (i) {i
our original funding submI
almost entirely due to a!
than our August 2021 plan, which formed the basis of
BEIS; and (ii ‘than our FY22/23 Budget,
Ncrease in non-Bex and non-NBIT technology spend.
5. There have been three material increases in / risks to the change forecast on a like-for-
like basis since the July 4+8 related to: (i) HMG policy on IR35; (ii) remediation spend
associated with HIJ; and (iii) reduced asset sale proceeds resulting from softer real
market conditions. We currently believe these could have a cumulative impact of}!
Financial Impact
6. Since the last Board we have engaged extensively with the business to try and id
savings against the £75m challenge and to date we have agreed savings totallin:
the target. We have line of sight to a further savings, taking the total to
IRRELEVANT I I though these have not yet been agreed by the relevant business sponsors.
Total Change Further
Change Challenge ‘Line of
Challenge I Realised Sight’
Challenge by Project: Target, I July 4+8
Realised and ‘Line of Sight’ Forecast
PED Replacement
Hard to Place 10
‘Fire Fighting’ Contingency 11
Property Compliance / Security 5
Technology Back Office 10
Post Office Operating Model
POL Data Platform
Organisational Effectiveness
Network Maintenance
Central Change Team
Copper Stop Sell?
Technology Risk and Resilience
Counter Printers
Accenture Contract
ATMs
PUDO
HM Ops Remediation
Project Eagle
People Placeholder
Horizon Issues Judgement 2 =
Total Allocated Challenge 127 11
Smaller Projects 36 12 4 6
Total Challenge 163 75 51 17
(1) Discussions with Verizon ongoing but material risk remains against the £10m 4+8 forecast for complete roll-out
FP RPENNNWWWWWWWYWAUUUUD
BRWORMAWUAGUNwwu
a
wo
ES
N
Confidential
POL Board Meeting-01/11/22 53 of 134
POL-BSFF-138-0000004_0052
POL00458418
POL00458418
Tab 7 Revised Cha
Challenge by Area: 4+8 Forecast and 4+8 £51m £68m
Spend Remaining at £51-68m Challenge __ Forecast I Challenge Challenge
Business Transformation Unit 9 6 6
I Commercial Products 29 25 24
I Finance & Procurement (¢) (e) ie)
Legal and Historical Matters 2 2 2
I Organisational Effectiveness 13 4 4
I Postmaster & Network 23 19 12
I Shared Services! 5 0 (6)
Supply Chain? 2 (3) (5)
! Technology 81 58 58
Total 163 111 95
(1) Includes Fire Fighting Contingency, Central Change Team, HTP Central Provision
(2) Includes £26m property sales in all three scenarios
7. We continue to work with the business to agree ‘line of sight’ savings and to identify
further reductions however based on recent discussions - particularly with the Commercial
and Retail teams - we believe that it will particularly challenging to realise the full £75m
target while also operating within acceptable risk parameters.
8. To achieve a target of £75m we would need to look at a range of further options including:
een scaled bac very a since our
original plans were developed (e.g. Branch Hub) or which would have a certain impact on
our commercial position, creating a new ‘gap’ in trading (e.g. ATMs, PUDO).
Risk Assessment, Mitigations & Legal Implications
9. The ! IRRELEVANT} vings agreed or identified above are not risk free, particularly in light of
the prioritisation that has already taken place against our original proposal to BEIS in
Autumn 2021 (against which Interpath recognised the impact cuts would be likely to have
on our risk profile, and our ability to respond to unforeseen challenges). Detailed below is
a summary of the incremental risks triggered by the :' identified so far, noting that
only the more material risks have been highlighted for the Board's consideration.
e ‘Fire Fighting Contingency’: We have removed the entirety of our unallocated
contingency o' which was established to manage risks in projects that were
cut back earlier in the year. This means POL will have no flexibility to respond to
unplanned or unforeseen activity or any cost risks that do crystallise, which presents
challenges given the complexity of what remains and the tightness of our funding;
¢ Technology Back Office / R&R / Counter Printers: Cuts will require a more urgent
prioritisation of ‘must do’ and reactive investment in technology with no, or very
limited, flexibility to address critical failures in the network or our wider infrastructure.
In particular we have no allocation for colleague IT and we would not be able to
respond to a repeat of the recent challenge with printer failures, which has seen
significant numbers of temporary branch closures;
¢ Copper Stop Sell: Assumes that Openreach misses its copper switch-out targets and
that many branches will move to fibre post Mar-25 or we are able to negotiate a
3
Confidential
54 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0053
POL00458418
POL00458418
Tab 7 Revised C
@
deferred cost with Verizon (or an alternative supplier), increasing network run costs.
In this scenario we may then trigger risk in NBIT, since given bandwidth constraints
the new system may not function well in branches that have not switched to fibre.
Verizon are currently signalling an all-in cost of ca.£25m for the network, of which we
have only £7m still in the forecast. If Openreach targets are met and / or we cannot
agree a deferred payment structure we will not have funding to convert connectivity
and branches will wither cease trading or move to costly 4G / Satellite connectivity
(3-10x cost per branch vs. current connectivity). This is not budgeted for in the P&L;
¢ PED Replacement: Current devices are end of support in Dec-2023 with no scope
for break-support after that date, so all funding in the forecast is spares management.
PCI-DSS accreditation expires in Apr-26 so all devices also will need replacing by then
and we expect a process to take up to 18 months from inception starting in early
FY24/25. Funding for this rollout will have to come after March 2025, raising VfM
challenges regarding duplicated cost and compounding the impact on Postmasters who
by then will already have seen disruption from NBIT and Copper Stop Sell;
e Network Maintenance: Saving is achieved by opening fewer Mains / Locals and more
Locals / D&C as we are already assuming Postmasters co-fund 50% investment (note
contributions at or above these levels are untested). This is likely to have a long-term
trading impact as we will not be replacing branches that are profitable for us though
Network numbers should still be met. Trading risk is not included in the P&L forecasts;
« Property Compliance / Security: Move to a more reactive approach to maintenance
and defer as much activity as possible to after Mar-25, with risk to compliance if
unforeseen circumstances arise. This will impact the colleague and customer
experience of our DMSs and Supply Chain locations. Also plan to cut back on wider
security investment, especially fogging which is reduced by 66% (which may be
difficult to realise in a challenging economic climate were crime levels to rise);
¢ POL Data Platform: Legacy infrastructure has some sustaining spend but is assumed
to not be retired, exposing us to critical failure risk if that sustaining spend is
insufficient. This also results in £1m unbudgeted opex per year to keep these systems
online. Also limits operational insight as well as efficiencies being delivered. Lack of
wider data management investment potentially impacts POL’s Inquiry position;
« PUDO: Devices are assumed to not be replaced at end of life and also fewer new
carriers will be onboarded, to allow cuts to be realised and some funding to be released
to support the wider Board approved plan. Probable impact on trading performance
from failed devices if we are unable to use spares management to keep sites online;
¢ Hard to inches and it does not offer
VfM, SOL IRRELEVANT . This is possible under the
SoS’s funding letter however it would trigger strong reaction from affected
Postmasters / NFSP. Some risk this is drawn into the Inquiry, but considered limited;
IRRE
Confidential
POL Board Meeting-01/11/22 55 of 134
POL-BSFF-138-0000004_0054
POL00458418
POL00458418
Tab 7 Revise
@
e¢ Automation: We are proposing to take out all spend to develop automation / refit,
impacting SSKs which NCR will not support from Dec-22/Mar-23 and resulting in
devices gradually failing and triggering an unbudgeted increases in operating costs.
There is a longer term impact on our wider Mails strategy and Postmaster profitability.
10. In many of the areas outlined above POL does not have immediate mitigations outside
taking a more risk-based approach to prioritisation, as we have no access to contingency
or recourse to external funds beyond HMG. Risks against the £335m settlement were
outlined to Interpath, UKGI and BEIS earlier this year and they will be aware that many
risks flagged then have crystallised. We will continue to engagement on our risk position.
11. With the exception of certain areas of the £75m challenge that relate to the Inquiry — e.g.
HIJ, POL Data Platform and Data Management - we do not believe that there are any
immediate legal implications resulting from the proposed challenge. If some risks highted
do crystallise - e.g. on compliance and technology resilience - this may change, though
POL will at all times plan and prepare on the basis that any such risks will be appropriately
managed. In addition risks related to the network — including but not just those arising in
IRRELEVANT
Stakeholder Implications
12. The reduced change forecast has a materially higher risk profile than our existing forecast,
and this should be a consideration for our Shareholder in four areas: (i) in network, where
we may not be able to meet network obligations in the event churn increases, branches
are disconnected / go offline, or we cannot identify new locations for low cost formats; (ii)
in technology, where our infrastructure will be less resilient and more vulnerable to failures
and / or cyber threats which, outside network risks, may have reputational impacts; (iii)
in commercial, where have no capacity to invest at a time when our two key markets will
be changing rapidly, causing our trading position to erode; and (iv) in funding, where the
lack of contingency or flexibility means if any risks do crystallise — a situation far more
probable than in March — we will have no option but to seek additional funding from HMG.
13. There are also implications for other stakeholders linked to points (i) to (iv) above,
including Postmasters, commercial counterparties including Royal Mail and the High Street
Banks, as well as other external parties (e.g. with Postmaster, colleague or Parliamentary
interests). More widely a lack of investment is likely to become increasingly visible to these
groups over the next two years and they then be more likely to lobby for change in our
plans or change their own behaviours (e.g. causing higher churn, accelerated
disintermediation or a desire to find alternatives to using the Post Office network).
Next Steps & Timelines
14. A recommended three year plan will be presented to the Board in December, and our final
change plan will form part of this. Between now and that session we will explore scope for
further savings, to get closer to the £75m target, and we also aim to improve the maturity
of our understanding of the risks these cuts present us.
15. If the Board has any views to share on the challenges set out in this paper - including but
not limited to those that have been agreed with the business so far - we would welcome
the opportunity to discuss these.
5
Confidential
56 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0055
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
POST OFFICE LIMITED
BOARD REPORT
Title: Strategic Platform Modernisation I meeting pate: I 1 November 2022
(SPMP) update
Zdravko Mladenov, Group Chief
Digital Information Officer
Zdravko Mladenov, Group Chief
Digital Information Officer
Author: Sponsor:
Input Sought: Discussion
Executive Summary
The SPMP programme is progressing well, with close to 100 Drop & Collect branches and two
full-counter prototypes locations live. The current timetable to complete is March 2025 with 3-
month contingency, with the programme pushing to increase that to 6 months.
However, the total costs to complete the programme have increased by £32m on a like-for-like
basis, primarily due to hardware cost and training cost increases. A further £29m of additional
scope is recommended by GE for inclusion in order to de-risk Horizon exit, while reflecting the
lessons from HIJ and the ongoing Inquiry.
After mitigations, the recommendation is for an increase of £45.5m inside the 3-year envelope.
Should the programme remain in its original cost envelope, it will be able to do so, but will
require difficult trade-offs.
The Board requested to revisit the original business case and examine whether exiting Horizon
continues to make financial sense for POL. The answer remains strongly affirmative, but the
detail will be formally shared at the January 2023 Board.
Report
The report covers the following six questions:
1. Progress update: What is the status of the NBIT platform in the Drop & Collect format
and in Release 1 of the NBIT full counter?
2. Current timetable to complete: What is the current timetable for the rest of the SPMP
programme?
3. Total cost to complete: What are the pressures (e.g., inflation, new scope) on the
total cost to complete the programme?
4. Programme funding recommendation: In light of the cost pressures and scope
increases, what is the programme’s funding recommendation?
5. Staying inside original cost envelope: How can the programme remain inside the
original cost envelope, while still meeting the desired contingency buffer of 6 months?
6. Re-affirming the business case: Do we believe the business case for exiting Horizon
has changed?
Confidential
POL Board Meeting-01/11/22 57 of 134
POL-BSFF-138-0000004_0056
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
@
1. What is the status of the NBIT platform in the Drop & Collect format and in
Release 1 of the NBIT full counter?
The platform has been operating for 12 months now and is live in 79 Drop & Collect
locations as 24 October 2022. Between 21 and 50 more locations will open before
Christmas peak trading. There have been no major incidents with the D&C platform.
As planned, Release 1 of the NBIT counter went live in the DMB branch in Aldwych,
London on 3 Oct 2022 and in St. Johns, Leeds on 17 Oct 2022. This very early Minimum
Viable Proposition version is serving successfully live Mails customer and identified a
number of improvement areas, as expected for a prototype. The quality of the hardware
and the intuitiveness of the user interface have been very well received by the DMB
agents.
Other than resolving any material outstanding bugs, all engineering work is now focused
on Release 2 of the NBIT Full Counter, which will be on Windows, will focus on Mails and
Banking products, will offer back office and cash management functionality and -
critically - will also process live payments in branch.
2. What is the current timetable for the rest of the SPMP programme?
The programme replanned its activity to complete no later than March 2025 and the new
timetable was agreed by the Board in Sept 2022. The new timetable addresses previous
delays due to:
« Android to Windows operating system switch, the decision for which took
longer and generated unexpectedly high levels of re-work;
= Legacy Pre-Paid Bill Pay Technology: the delay in establishing a path for
leveraging capability for Legacy Pre-Paid bill payment solutions;
«= Ingenico/ Worldpay involvement: the delays by Ingenico/Worldpay in
supporting the Payments stream of NBIT;
= National Lottery: the uncertainty about the National Lottery contract and the
technology needed to support it.
Appendix 1 shows detailed planned milestones and the three main releases (Oct 2022,
Mar 2022, Oct 2023), with the last one triggering the start of a slow migration, which
would accelerate immediately after Christmas 2023.
The timetable includes 3 months contingency time. The programme has already taken
the necessary steps towards extending this buffer to 6 months (e.g., leveraging Payzone
technology more), but has not formally replanned again. It will confirm the details to the
Board in Jan 2023.
Confidential
58 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0057
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
@
3. What are the pressures (e.g., inflation, new scope) on the total cost to
complete for the programme?
The original business case included approximately £36m in contingency provision for the
possibility of having to extend the programme end date from March 2024 to March
2025. The cost of that extension is actually only approximately £15m, but other cost
pressures have more than erased the remaining contingency. The cost pressures on a
like-for-like basis total £32m, in addition to the remaining £21m contingency.
These cost pressures are outlined below, with already undertaken mitigation actions as
footnotes:
« Hardware cost increases, also due to inflationary pressures and adverse exchange
rate effects [estimated £24.9m]';
« Training costs increases: the original business case did not go far enough in
projecting the costs of preparing Postmasters; the current scope also includes a
Learning Management System (LMS) [estimated £12.1m];
= Cost due to the change and the delay in the change in the decision on operating
system [estimated £3.2m];
« External assurance spend: the original business case did not cover the costs of
3" line of defence and subsequently prescribed additional external assurance
[estimated >£2.6m]?;
= Unexpected cost of product journey discovery work due to lack of in-house
understanding how transactions and processes work in Horizon [estimated £4.1]°;
= Recruitment delays and backfills with third-party resource [estimated £4.9m so
far]*;
In addition, the programme is facing a number of scope increases, compared to the
original business case:
A. Payzone Technology / Second Device: Leveraging Payzone’s technology as
means of de-risking the technical delivery of the legacy pre-paid bill payment
functionality for the NBIT Counter, as well as facilitating an expanded scope of the
Drop & Collect proposition, in line with the broader, new Network Strategy
[estimated £11.7m];
B. Cyber Security: Additional investment in ‘fortifying’ the AWS-facing footprint of
the NBIT application, required due to the cancellation of CAPEX investment and
OPEX personnel in the Cyber Security function of Post Office [estimated £2.5-£3m];
+ Run a competitive tender to ensure that POL receives the best possible value for money for devices. The awarded contract
includes a price guarantee for 12 months and the programme is planning to order all required full counter devices and
peripherals within the 12 months window.
2 In light of the lessons learned from HIJ and the developments in the ongoing Parliament Inquiry into Horizon, even this
increased scope likely will require at least further consideration, if not further increase.
3 Revised the way the team is operating and constructed to maximise the progress against increased complexity. We have also
reprioritised capacity to ensure timescales are maintained.
4 Approaching a range of potential suppliers and also capitalising on the POL change to its central supplier. In the meantime, the
programme continues to use larger IT provider resources to fill critical vacancies.
3
Confidential
POL Board Meeting-01/11/22 59 of
POL-BSFF-138-0000004_0058
Tab 8 SPMP Deepdive including NBIT Roll-out
POL00458418
POL00458418
@
Cc. Postmaster Tri
ing: Increasing the frequency and availability of in-person-in-
branch training, in addition to online modules and classrooms [estimated >£2m];
D. Retail Network Support: Additional support to reinforce and/or backfill existing
BAU resources (e.g., Area Managers) for key roll out activities [estimated £7.5m,
but re-assessment in progress];
E. Cash and Stock Audit on Migration Day: Conducting an independent verification
on migration day of the stock and cash position of each branch, before entering
those formally as the starting NBIT balance [estimated >£5m];
In light of the cost pressures and scope increases, what is the programme’s
funding recommendation?
The programme can be completed within its original 3-Year Plan allocation, but that
requires making cuts to respond to the range of cost pressures and scope increases. The
details of these cuts are covered in paragraph 5.
The programme’s current recommendation is for a new funding envelope of £240.7m.
Out of this envelope, approximately £15m will be covered in FY25/26, due to the
postponing payment for select hardware components (see footnote - paragraph 5). The
remaining £225.7m represent an increase of £45.5m over the current 3-year plan
allocation.
The chart below outlines the ‘bridge’ from the original funding envelope:
+ Consumes £36m original contingency and adds further £32m in cost
+ Increases cover (not exhaustive list): hardware costs (£25m), training costs (£12m), impact of operating system
switch (£3m), recruitment delays (£5m), additional product journey discovery work (£4m)
Payzone Technology / Second Device: £11.7m
Cash and Stock Audit: £5m
+ Retail Network Support: £7.5m
+ Postmaster Training: £2m
ii
Cyber Security: £2.5m
Original Adverse Effects New Scope as Deferred Current
Business Case on Like-for- of Oct 2022 outside the 3- Recommendation
(May 2021) Like Basis year plan for 3-Year Plan
4
Confidential
60 of 134
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0059
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
@
5. How can the programme remain inside the original cost envelope, while still
meeting the desired contingency buffer of 6 months?
In order to achieve the new timetable, account for the cost pressures and scope
increases and still remain within the original cost envelope, a number of difficult
compromises will have to be made. Those are outlined below®:
> Technical Delivery: Transfer to third-party offshore only resourcing (as opposed to
many onshore); we are also assuming we can fill remaining vacancies by Dec 2022 —
estimated savings of £4.4m;
> Postmaster Data: No provision of a Data Vault for Postmasters to store data
electronically; Postmaster will continue to print like today — estimated savings of
£1.9m;
>» Cyber security: Do not invest further in cyber security reinforcement (see
paragraph 3B) - estimated savings of £2.5m;
> Cash and Stock Management: Reducing to a minimum the changes in branch
management process for the launch of migration - estimated savings of £1.7m;
> Business Acceptance Testing: Removal of external support for the business as
part of the user testing process, i.e., BAU resources will be seconded into the
programme without backfill - estimated savings of £2.0m;
>» Training: Removal of in-person training - all training now assumed online (see
paragraph 3C) - estimated savings of £2.1m°;
> Postmaster Communications: Removal of additional third-party support for
communication and engagement materials as part of deployment preparation; those
are to be conducted by in-house resource - estimated savings of £2.1m;
> Deployment / Service / Support: Use of a remote support team + existing BAU
resources to complete all pre-migration activities (e.g., physical site surveys or early
visits by the implementation managers / area managers); physical in-person support
to Postmasters limited to only on the branch’s migration day unless exceptional
circumstances arise; reduction of additional service and support agents to reinforce
in-house Branch Support Centre (BSC) - see paragraph 3D; total estimated savings
of £12.1m;
>» Cash and Stock Audit: Do not complete a cash and stock audit on migration day
(see paragraph 3E) - estimated savings of £5m;
5 Does not list already made decisions: (1) Removal of National Lottery from the main counter scope; (2) No compensation
provisioned for closing branches for several hours of trading during migration - compensation likely only if migration takes
longer than planned; (3) Deferral of £15m cash payments for a subset of hardware to outside the 3-Year-Plan period; (4)
Transfer of £2.3m for SSK development to the Mails Automation programme.
® Further training cuts are possible up to approx. £12m estimated savings, but those are not recommended.
Confidential
POL Board Meeting-01/11/22 61 of 134
POL-BSFF-138-0000004_0060
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
@
> Branch Remediation: No funds provided for remediation of in-branch physical
environments as a result of migration - estimated savings of £1.0m;
> Third party assurance: Limiting the scope of third-party external assurance to the
originally planned levels - estimated savings of £2.8m at this stage.
6. Do we believe the business case for exiting Horizon has changed?
While staying with Horizon is not possible as a medium or long term solution, it is
possible to ‘sweat the asset’ longer than its planned 30-year life as of 2025. Initial
modelling suggests that the financial profile of staying with Horizon remains vastly
inferior to moving to NBIT, even in scenarios where NBIT is delayed. The detail,
including a comparison of the ‘steady state’ costs to operate, will be formally shared
with the Board in the January 2023 session.
Financial Impact
7. There is no financial impact from the activity outlined in this paper yet, since the
programme can remain inside the original 3-Year plan envelope with various offsetting
increases and decreases, thus preserving an overall net neutral financial position for
POL. However, note that the recommendation by the programme and the Group
Executive is to increase the programme funding envelope by £45.5m inside the 3-year
plan.
Risk Assessment, Mitigations & Legal Implications
8. While there is an extensive risk register, it is not covered in this paper. There are no
known legal implications to consider.
Stakeholder Implications
9. The following paper is likely to become visible to BEIS via UKGI. The programme is
presenting at the BEIS Investment Committee on 1 December 2022, and expects to be
directed to complete a rigorous further government-specific assurance (“Gateway
Review”) in 2023, in addition to the existing assurance schedule.
Next Steps & Timelines
10. The programme will be returning in front of Board in January with the regular status and
funding update. It will include video material from the operation of the NBIT counter in
Aldwych. The programme also expects to present in January the updated overall
assurance strategy as requested by Board. Lastly, the programme will support the Chief
Retail Officer presenting to the Board the rollout strategy for NBIT and the implications
on BAU operations.
Confidential
62 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0061
POL00458418
POL00458418
Tab 8 SPMP Deepdive including NBIT Roll-out
@
Appendix 1: SPMP milestones
Key Programme Milestones
Key Milestone
I Date
Description
R1 live in branch
29 September 2022
(open for NEDs on 3
Oct 2022)
Similar product set to Drop & Collect on full
counter hardware and software; on Android
R2 live in branch
R3 live in branch
March 2023
October 2023
All Mails and Banking products, including
cash management; most branch
management functionality
All remaining products and branch
management functionality
Start full rollout
February 2024
Migration of all branches from Horizon to
NBIT
Complete rollout
Pre-peak trading 2024
Last Horizon branch migrated onto NBIT
Contingency period
February - March 2025
Allowance for any stragglers to migrate,
preparation for transition to BAU
Close of programme
March 2025
SPM Programme closes, all activity goes to
BAU
Release 1 (R1) on Android, which is a similar product set to Drop & Collect, but operates on
the Full Counter hardware and POL EPOS software. Release 2 (R2), which has all Mails and
Banking products and most branch management (POL EPOS) functionality, and Release 3
(R3), which has all remaining products and branch management functionality.
@ NBIT Programme
(On-going Communications Campaign
202 2023 2a — 235-9
a
. Fitot Deployment Pilot Deployment Full Deployment ‘
2
2 +
2 fers H : ,
. + Help get branches ready (Operational preparedness rl-outlogisics ining ele) * i
7
Confidential
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0062
63 of 134
POL00458418
POL00458418
S1ePdN SBUSTIEUD 1809 NEWH = UEld EBA SS4UL 16 GEL
Three Year Plan
HMBU Cost Challenge Update
01 November 2022
3
g
i
é
STRICTLY CONFIDENTIAL
POL-BSFF-138-0000004_0063
Z2/LL/Lo-Buneew pueog 10d
veLJocg
POL00458418
POL00458418
1 Su mma ry ™ HMBU has been given a £34.6m cost challenge
1. The HMC Terms of Reference states HMBU must ‘Manage the Budget in consideration of all stakeholders’
2. The HMBU team’s work to date in managing workstreams in flight is showing an underspend on existing funding envelopes of £525m (HSS
£125m; OHC £400m). While much of this will be down to forecast volumes reducing much is also down to the way cases are being managed e.g.
HSS post offer
3. Stakeholder feedback over the course of this year appears positive as targets are being achieved with little adverse external feedback
ajepdn eBualieyo S09 NEWH - Ueld 128A BBUL 16 GEL
4. Since the original budget was set, additional activities have been added to HMBU’s scope increasing costs by £17.4m over the budget period. It is
common for remediation project overhead costs to rise as their scope increases
5. HMBU is six months (17%) through the three-year budget period, yet has already spent £22.8m (30%) of the original £76.2m budget
6. To maintain 30 months of spend within the remaining £53.4m budget there is currently £19.7m (37%) of savings to find. This challenge increases
to £23.7m (44%) if the unidentified targeted savings of £4m cannot be found
7. The majority of the saving would have to be achieved in FY 2023/24 meaning savings need to be identified and delivered over the same period
that HSS Late Applications, OHC, Remediation Pot A and most likely Remediation Pot B will all be in flight.
8. To save external legal costs, remediation activity is being insourced. Severe cuts to the HMBU resource (legal, project, operations and finance)
currently being set up to complete this work could undermine the effectiveness of the remediation work with reputational consequences
9. There is activity to negotiate a material rebate from HSF and to reduce their charges relating to non value added activity and better use of KPMG’s
data management system - this could provide material savings across HMBU and the Inquiry cost centres but at this stage the outcome is not
certain
10.Given the speed at which HMBU was set up and the urgency with which it has had to tackle tasks there is undoubtedly efficiency and
organisational savings that can be made. An HMBU Programme is being set up to identify the opportunities and drive them through without
adversely impacting on the successful outcome of the key workstreams. However, it is likely that the magnitude of savings found will only cover
the unidentified targeted savings of £4m and not make a material difference to the remaining £19.7m cost gap
(,»
WEA
Post Office”
POL-BSFF-138-0000004_0064
vEL JO 99
22/1 L/L0-Bunee— pie0g 10d
2 HMBU Cost Challenge = £14.9m of net savings have been A by
changing the remediation approach to OHC and HSS Late Applications
POL00458418
POL00458418
In response to the £34.6m cost challenge, a view of incremental costs and realistic savings options were shared with POL Board on 27 September with a
remaining savings gap of £17.3m
Below is our current view of status: Savings still expected, two savings have reduced, one has increased
The savings gap has increased by £2.4m since September
Cost Challenge HMBU HF contract negotiation _—Reduction in banked ‘OHC claims: Late Applications: Targeted Savings HSS Post Offer Assumptions Savings gap
savings 293 > 161 In-house
mSaving-at risk mSaving-extra _mSaving- expected I
ajepdr eBualleyd 1SOD NINH - UEld PEA S211 1°6 GEL
(>
elf
Post Office” CONFIDENTIAL
POL-BSFF-138-0000004_0065
22/1 L/L0-Bunee— pie0g 10d
vELJol9
3 H M BU Cost Cha I lenge ™ HMBU has identified a way to bridge the balance
of £19.7m, the risks are summarised on the following slide.
POL00458418
POL00458418
A number of significant interventions could be taken to close the remaining savings gap of £19.7m.
I neem
ajepdr eBualleyd 1SOD NINH - UEld PEA S211 1°6 GEL
(Ww
0
Savings gap Reduce Stop Restructure Restructure Halve Halve Rod C savings:
HSS DRP PFA Triage Finance Legal Ops Team Project Team HSF & KPMG
m= Potential HMBU Savings Options = Potential External Savings Options
As
Post Office” CONFIDENTIAL
POL-BSFF-138-0000004_0066
POL00458418
POL00458418
= =
z
$
.
° 2
. . 2
4 Savings Gap Options .
ea
a
a
- - . . 9
HMBU have a savings gap of £19.7m. Interventions that could close this gap include: ta
[e
I # I costsaveitem I assumptions is saving I
1 Reduce HSS DRP & + Reduce DRT by 3 FTE Curent ProsssedSeirg — « Reputational £2.6m 2
Post Offer by 75% + Number of Mediations reduced by 25% Razs 2 q a = Resolution process will be elongated ®
+ Arbitrations reduced to 3 at the end in FY24/25 rays 2 36 ag * More disputes than forecast - additional settlement costs =
2 Stop PFA Triage + Removed from Oct-22 onwards + Reputational— this has commenced so difficult external message £0.7m ®
0 we now stopped.
fe)
2 3 Restructure Finance + Remove costs of Finance team + Loss of Financial Governance and cost control £1.2m
a + New ownership required for provisions modelling and reporting
to BEIS / UKGI / External Audit
Remove 9 existing roles + Greater legal risk £4.1m
Remove the 12 Legal Vacancies + Complete reliance on external legal advice at increased cost,
+ Loss of ability to do Detriment 1 & 2 in-house - CL assessment
o
8
4 Restructure Legal
zit
wa
Halve the Ops Team + Team only included to the end of FY23/24 in forecast. + Saving reduced by redundancy costs, not included £0.7m
Require at least 3 months notice + consultation. First savings Apr-23. * Loss of ability to deliver Detriment 1 & 2 or would take twice the
time and funding may run out
+ Impact on processing Late Applications
6 Halvethe Project Team + Current Total 41 FTE @£13.4m + Impact and delay on HMBU performance: £6.7m
+ Loss of resource across Prog Managers, PMs, PMOs, and BA roles © Impact on HSS progress
© Delay to Late Applicants
© Impact on OHC delivery
© Severe delays to Detriment 1 delivery
© Loss of ability to deliver Detriment 2
7 Rod CHSFand + The balance of cost savings required can be met by the Rod C initiatives * Ability to deliver the potential savings given the time left on HSS £3.7m
KPMG savings + See subsequent slide for further details and the insourcing of OHC
Post Office”
POL-BSFF-138-0000004_0067
POL00458418
Inquiry Cost Options
1st November 2022
3
g
i
é
8
SUBJECT TO CONFIDENTIALITY UNDERTAKINGS — NOT FOR FURTHER
CIRCULATION
VEL IO6D
POL-BSFF-138-0000004_0068
vEL JO OL
Lo-Buyeew pueog 10d
22/44
POL00458418
POL00458418
qeL
nul Z
e
puad:
1. Executive summary
The purpose of this presentation is to provide management’s current view of the likely total cost of the Inquiry programme and the options available.
There have been material changes to the Inquiry over its 2+ year history that necessitate budget reassessment.
Proposed recommendation: hybrid option 1(B) in which we continue with HSF (solicitors on record), utilising more fully HSF’s lower-cost resources in Belfast
and potentially Johannesburg together with onboarding a cheaper law firm for discrete areas (e.g. witness preparation for non-material witnesses); and
potentially obtaining an overall discount (up to £3m). Furthermore, management recommends that Post Office notify BEIS of the factors in Slide 3 and that
further specific funding is required to enable Post Office to properly support the Inquiry without which it will be necessary for Post Office to advise Sir Wyn
that it will not be able to provide all the support that it considers appropriate to enable the Inquiry to meet its terms of reference and ways of working.
Management considers the risks involved in changing solicitors of record (option 2) at this time would be significant and the potential savings to be
insufficient to justify such a decision. That said, it provides a cheaper cost model and Board has to make this decision in a broader context. It is therefore right
that Board consider this option but noting the risks of transition and failing to properly manage the Inquiry appropriately.
Whilst we will enhance cost controls over third party suppliers, Post Office neither has control of this programme or the ability to significant influence its
approach. Sir Wyn has relatively wide discretion and is ultimately in control of the Inquiry’s progress and timeline as indicated by slide 3.
Providing funding to POL to support the statutory inquiry is clearly distinguishable from funding Post Office to engage in litigation for which there have
previously been historical public policy reasons. King’s Counsel, HSF and Post Office Legal all recommend corresponding with BEIS in respect of securing
further funding.
Next steps: We will be continuing to assess the feasibility of both the hybrid option and the ‘alternative supplier’ option in the next fortnight and will update
Board in early November prior to the 3-Year review so that this can be aligned to the Board review and approval of the 3 year plan on 6 December.
(G»
el
Post Office”
POL-BSFF-138-0000004_0069
Lo-Buyeew pueog 10d
22/44
vELIOLL
POL00458418
POL00458418
qeL
nul Z
e
puad:
2. Budget history and context
The Post Office Horizon IT Inquiry was first established as a non-statutory inquiry in September 2020. It was expected to last 4-5 months.
During its two-year + life to date, there have been significant changes to scope, timeline and scale of participation:
* The Inquiry converted from non-statutory to a statutory footing
. Months of Human Impact sessions were added
* The List of Issues expanded from 179 to 218
* The Inquiry jurisdiction was expanded to include comparison between Scottish, Welsh and Northern Irish devolved matters
. Scope was expanded to include compensation which in turn resulted in 2-day compensation hearing; progress report and a further compensation hearing listed
on 8 December
* The commencement of the evidence phase of the Inquiry was significant delayed (though replaced with other matters)
* The number of hearing dates was increased
* The timeline expanded to more than triple the expected timeline.
Additionally, this programme has borne the cost of locating, assessing and digitizing relevant hard copy materials from POL's physical locations in readiness for
disclosure and witness preparation. Whilst this has come with significant cost (£m), it may be possible to subsequently leverage this in terms of managing historical
records for Post Office going forward.
(a
Ks
Post Office” Confidential
POL-BSFF-138-0000004_0070
POL00458418
POL00458418
POL-BSFF-138-0000004_0071
POL00458418
POL00458418
POL-BSFF-138-0000004_0072
4B. Mandatory and non-mandatory core legal work
POL00458418
POL00458418
Collation of data (9 sose; 218, RT, the: cow
partcoants, et) foreach witness preparation
Witness statement preparation inal speaking to
witnesses; engaging wth colation rafting witness
statement)
(ral hearing witness preparation (review of further 9
request oral wit reo) - HSE
‘Preparation fr, and attendance at hearings = HSF
necessary to resond adequately t 9 witness
needed to comply with 9 witness statement
requests (sit between material witresses xt HSE
and non-material winesses x? At prov)
needed to comply with equest freal witness
evidence (spilt etween materal witnesses x4 HSE
tnd non-material witnesses x ?- option for alt model)
Y = necessary to supzort Counsel (can strearine
attendance as long as canst facitate proper
engagement with Inquiry and sort to Counsel)
ariaooa
aeons
2aaass
s0se19
[Assumes 15 nonseniorwitresses @E60K each + (9% VAT assumes nene are covered
by DBO) = £1308000; pus 4 senior witresses (broad range) @ £320k each + (9% VAT]
less assumed 55% DBO cover = £627840; plus 8 senor witnesses (narower ange) @
£200 each + (9% VAT) less assumed 55% DEO cove
eunse costsregresent approx 10% ef ths witness preparation (see seperate counsel
ine)
The remainder i sais 7ON colation of data; 20% witness statonent support 10%
‘oral hearing suppor.
49792 02402
opti
Assumes 15 nonseniar witnesses
Skeach + (9% VAT] assumes none are
‘covered by DBO) = £513125; sus 4 senior witnesses (broad ange) @ £187-5k each +
{9% VAT) less assumed 55% DBO cover = £367875; lus 8 xenor witnesses (narowe
range) @ £93,754 each «(9% VAT] ers assumed 55% D&O cover = £267875; total =
Counce costs rearesent appro 10% of hs witness preparation (see seperate counsel
ine)
The remainders spits 70% collation of data; 20K witess statement suppor; 10%
242798
ont
‘Assumed aporox. 40% reduction in Optt (noting tat counsel element wil net be
reduced)
121399 146915
Counsel coats represent approx 10% of Opt witness preparation (
course line)
The remainder is sats 70% clation of data; 20% witness statement support 10%
(Opt: assume 181 hearing days @ an average €460/n° x8 hours attendance +
(99% VAN) = €726027; plus 4 solos x 10 preparation days @ an average £460/hour
17 hours fo cosing submissions + (% VAT = £14032; total = £866419
asoa19 519851
(Opt 2 assumes 40% reduction in Opt cont by moving to an alternative egal firm
The numberof witness called i withing the purue ofthe Inguty and costs may therefore
neoase of decrease
Feral onions, 55% DBO recovery reflects the ikinood tat sone
0 support wl be om
deemed personal rates than corporate; also iti key that high SF cost wl be
challenged by the insure.
Ota
GE{Seniorwitwesses (x12) {Lito fa
inPrases 6-7)
Nik Read, Ai Cameron, Amanda Jones Jeff Sat, Ben Foat, Dan Zines/Tim Melnnes,
Simon Oldnal, Tracey Marshal Joe Wel, Rachel Seaabelot Son Recaln
We woud expect O80 cover to come into effect fora majority of there witnesses and
recover SSW% ofthe witess cot
Phase 2 has 11 former witnesses al benefiting from D&O cover. iis unikely hat later
reasonabie number and if they are
Former witnesses nt covered by DBO tey wl ava ef the £20,00 (plus Vat cover but
costing staf would need to come under a more structured approach and narowing the
00 of legal support gains knowledge and therefore savings
‘assumed £204 cover rule woud reduce the coat further (Note: OPTION FOR
CONSIDERATION - notneded in gues.
oro
‘Attendance by POL egal every day not hard charged can sveanvine HS attendance as
Tong as can stl facilatesrer support fer Counse! and engagement wits Ina.
Post Office
Post Office Limited — Commercial in Confidence
POL-BSFF-138-0000004_0073
POL00458418
POL00458418
POL-BSFF-138-0000004_0074
POL00458418
POL00458418
POL-BSFF-138-0000004_0075
POL00458418
POL00458418
POL-BSFF-138-0000004_0076
POL00458418
POL00458418
POL-BSFF-138-0000004_0077
POL00458418
POL00458418
POL-BSFF-138-0000004_0078
POL00458418
POL00458418
POL-BSFF-138-0000004_0079
POL00458418
POL00458418
4
Appendix A.
- Number of hearing days
* Alternative solicitor panel rates
POL-BSFF-138-0000004_0080
vel soze
Z2/LL/Lo-Buneew pueog 10d
Hearing days (common to all options)
POL00458418
POL00458418
°
puadg Aunbul 26 qeL
No of Hearing Days Days Phase Status
pees oa eed Ee [Soe archive for London, CarditT Leeds.
Rts9 2 Phase 2 erat Phan 1- Human Impact Hewrngs etasaow and ear arngs heldinFebrary
Dec 7 Phase 2 Confirmed eee
Jan 9 Phase 3 Confirmed
Feb u Phase 3 Confirmed soe archive for hearings Ned on 6 July and 33
a 5 age Innes of Compensation Hearings se
April 16 Phase 4 International Dispute Resolution Centre,
May 16 Phase 4 neon
June 16 Phase 5 }12 - 14 October 2022,
July 16 Phase 5 ceca
Aug 0 Provisional timetable
Sept 16 Phase 6 International Dispute Resolution Centre,
Oct 16 Phase 6 auaienits a won ——
Nov 16 Phase 7 rollout and meditations oO pee eres s6Days- Nov
Dec 8 Phase 7
Provisions timetable
Total Days 181 Iter ans pts Reva CERT iP bee
hemingenimatterrelingo cempensatn [anton bays Dee
Intaruonl OapatsRevSnion Conve,
at London
Phase 3- Operation: talning, aetanceresokton of [Provisional doves Days -Dee
Kate Gallafent KC (£425 p/h) \deptes,lnowledge wed retention of errs inthe I13 to 16 Oocember 2022 9 bays Jan
Potential additional KC (£425 p/h) ‘oman piaiotennminenee a
14 Febrry 30 March 2023
Simon Henderson (£400 p/h) 8 0ays Mar
Jenny MacLeod (£250 p/h) eee I ss
" “criminal procee s, knowledge of and responsibility vos ates TON soneced
Sophle {£125 p/h) {or talus in rwentigation and daconure
have 5 Redren: eco tut, Second Sh,
‘the group litigation, responding to the scandal and I“NSe™ net dates TBA baheaal
lepensuton sdhemen
Phan €- Governance: onturng of arson,
vacua erangerent
eee London: erat dates 186 3200s
(verigt ond whirtebiowing
Phone 7 - Curent pecs end procedure and
viene london rot dates TBA 24 bays
Ga)
Post Office” Post Office Limited — Commercial in Confidence
POL-BSFF-138-0000004_0081
Z2/LL/Lo-Buneew pueog 10d
vel soe
Alternative solicitor panel rates
POL00458418
POL00458418
puadg Aunbul 26 qeL
rsa onaoe Moy Rats oe VAT) Day aera aad
a
Tandon [ “ot otiondon I terdon “oxo
Pa eg er es 238 000 cata
Tandon “oot otiondon [Teron “ota
ans eg ar 70 WA oz Wh
Talon [oat atiandor [Tandon [oot
FULBRIGHT LLP [iunior Associate £263, £155 22,104 £1,240
ea cate eT iss i a0 ra
SttegleWow I Svaeg Wowk I State Work
Parnerleqal Director “for ‘Seo ‘s68 ‘Soto
Tandon I “oat otiondon I Tandon I “oto aaon
WOMBLEBOND — Fassociate. 188 e188 E500 £1508 ees.at
Alternative solicitor rates
£189.50 average hourly rate
Post Office”
Post Office Limited — Commercial in Confidence
®
POL-BSFF-138-0000004_0082
POL00458418
POL00458418
Tab 10.1 HMU Update
POST OFFICE LIMITED
BOARD REPORT
Title: Historical Matters Programme Meeting Date: I 1 November 2022
Update
Author: a Hissorkea! Matters. Sponsor: Ben Foat, Group General Counsel
84 of
34
Input Sought: Noting
To note the updates below on the activities being undertaken on Historical Matters (HM)
workstreams.
To note HMFM approved funding of £1.727m (inc iVAT) Historical Shortfall Scheme running
costs for the month of November 2022.
To note HMFM approved funding of £402k (inc iVAT) HSS Post Offer running costs in
November 2022.
Executive Summary
The Strategic priorities for HMU are outlined below with a fuller Operational Summary of HMU
Workstreams detailed later in this update.
Criminal Appeal Cases
1.
The total number of overturned historical convictions is currently 81. This comprises 64
overturned by the CACD and 17 conceded at Southwark Crown Court. Within the cohort
of Southwark cases, one is a CPS conviction.
The CCRC is currently considering 31 cases which includes 27 POL-prosecuted cases which
may have relied on Horizon data, 3 non-POL prosecuted cases and 1 case in which the
identity of the prosecutor is unknown due to lack of papers.
One case is likely to be referred by the CCRC very soon and Hudgell has informed P&P of
an imminent appeal to the CACD. On initial review, POL is likely to concede both appeals.
Historical Shortfall Scheme (HSS)
4.
The end of October external target of 85% of offers is on course to be met, however there
is a challenge to meet the internal stretch target of 95%, but all efforts are being made
to meet this stretch target, including the resolution of challenging populations such as
Insolvency and Harassment. Given these challenges and the cases being more complex,
HRC have been advised that the 95% stretch target is more likely to be delivered by the
end of November still ahead of the external target of 90%.
The 5% of remaining cases are likely to be difficult and a review of all of these is currently
underway to enable the development of a plan for delivery in a timely manner. There are
a number of key difficulties in these claims including Malicious Prosecutions, Assistant
Convictions.
Funding for Late Applications to the Historical Shortfall Scheme has now been agreed with
BEIS and POL will now proceed to process these subject to HSF agreeing to using the HSS
processes, with the Independent Advisory Panel continuing their role in recommending
settlement amounts.
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0083
POL00458418
POL00458418
@
Overturned Historical Convictions (OHC)
7. Work continues to ensure all claims are progressed as quickly as possible, in particular
progressing the non-pecuniary claims that have now been received and are being settled
in a timely fashion.
8. An update paper on the options for the OHC Compensation Process, was presented to HRC
on 30 September. This updates on the ongoing relationship with HSF, cost options, and
principles on how the transition process from a negotiated to a remediated solution will
operate. Further detail will be presented on 27 October.
Post-Master Detriment - Suspension Payments
9. Funding has yet to be confirmed by BEIS and will not be available until the Funding
Commitment Letter and Operations Agreement are finalised. Linklaters are preparing the
Funding Commitment letter in respect to unpaid suspension fees and associated
consequential loss (funding request A).
10. The Operations Agreement has been written and is currently in the feedback process with
UKGI/BEIS.
11. HMU have confirmed the remediation approach when PM's do not accept an offer and elect
to submit an alternative Consequential Loss Claim.
Post-Master Detriment - Outstanding Balances
12. Legal advice is thai
Inquiry update
13. Awritten submission to the Inquiry on Compensation has been filed by K Gallafent KC on
behalf of POL.
14. HMU have contributed to the inquiry submissions which will be made in the week of 11"
October. We have been able to demonstrate progress in a number of the areas previously
flagged by Sir Wyn though disappointingly, we will not be able to confirm that funding is
in place for the suspensions’ remediation work.
15. Sir Wyn Williams has announced that he has scheduled an additional one-day hearing on
8" December, to allow all participants to provide detailed updates on progress in relation
to compensation. HMU will continue to challenge BEIS/UKGI to work at greater pace to
ensure progress is made across all key areas.
Cost Challenge
16. A paper responding to the Cost Challenge to reduce HMU Costs by £35m against forecast,
in the period to 31st March 2025, was presented to HRC on 30th September.
17. All areas of HMU are challenged with reviewing processes including consideration of a
remediated approach to OHC Claimants and processing Late Applications in house, for
example.
18. Cost modelling on Claimant Volumes is also being undertaken to establish variable costs
19. To deliver a Cost Challenge of £35m across HMU will entail significant restructuring,
change of policies and a significantly adjusted risk appetite.
POL-BSFF-138-0000004_0084
POL00458418
POL00458418
@
Workstream Operational Updates
Criminal cases: Appeals in the pipeline
20. The SCCRC is currently considering 10 cases prosecuted by Crown Office and Procurator
Fiscal Service (‘COPFS’) in Scotland that may have relied on Horizon data Decisions are
expected in September on whether they will be referred for appeal. COPFS would be the
Respondent to the appeal.
21. The Public Prosecution Service of Northern Ireland (‘PPSNI’) is the Respondent in two
appeals at the Court of Appeal in Northern Ireland. The preliminary hearing took place on
12 September 2022. PPSNI have until 3 October 2022 to notify the appellants’ solicitors
as to whether PPSNI will consent or object to the appeals. The next hearing date is on 10
October 2022.
22. Although POL will not be the Respondent to these appeals, POL/P&P are in regular contact
with COPFS and DWP to monitor progress and offer assistance.
Overturned Historical Convictions (OHC)
23. Key strategic points are:
i. Following the mediation on 9 September 2022, POL have entered into full and final
settlement with Ms Hamilton (9 September 2022) and Ms Henderson (13 September
2022) with respect to both their pecuniary and non-pecuniary damages.
ii. Following Sir Wyn Williams’ recommendation in the context of the Horizon IT Inquiry
that POL's decision not to offer interim payment to the Public Interest Only cases
should have independent oversight, HSF and POL Legal have put forward a proposal
ne claimant (Carl Page) has returned a signed agreement
and POL are arranging payment. All other claimants have indicated they accept the
offer and so signed agreements are now awaited.
iv. Hudgell Solicitors are now advancing, in tranches, the non-pecuniary claims of their
clients who did not participate in the ENE along with supporting evidence (including
a medical report where appropriate).
v. Following consent from Hudgell Solicitors, HSF have written to the remaining
claimant solicitors seeking confidentiality undertakings to enable the release of a
redacted version of Lord Dyson's Evaluation to assist them in formulating their claims
POL-BSFF-138-0000004_0085
POL00458418
POL00458418
Tab 10.1 HMU Upe
@
for non-pecuniary damages in the way Hudgell Solicitors’ clients have done. Aliant
Law are the first solicitors to have returned their clients' undertakings.
Status of Interim Payments (at 26 September 2022)
24. 80 (out of 81) applications have been made with £100k interim payments made in 75
cases, £75k in 1 case and 3 applications were declined. 1 applicant has been made an
offer but is yet to accept. 1 applicant has indicated he does not intend to make an
application
Postmaster Detriment - Suspension payments
25. Programme and Process Assurances are underway with Deloitte and are progressing to
plan. A final Programme Assurance has been provided with no areas of concern noted with
the report largely green with some areas of yellow (potential improvement identified). A
26. Suspension Data assurance is undergoing further QA checks as it has come to light that
some (a minority) Postmasters may have received retrospective suspension remuneration
and so cohorts are being reviewed to ensure that no duplicate payments are made.
27. The legal case assessment team is being stood up with two LCA’s recruited and a further
LCA to join the team in November. Further authority has now been given to recruit
additional resource and it is hoped that the adverts for this will go live next week.
Postmaster Detriment - Outstanding Balances
28. Work has continued on the now 14 products / processes which have been identified that
may have given rise to detriment. From these areas, 3 have been confirmed as actual
detriment (not large), 3 as potential detriment and 3 with no detriment. The other 5 items
continue to be investigated and are expected to be completed by the end of November.
29. To provide further understanding of the issue and, as per a HRC request, a detailed review
of 10 Outstanding Balances which are currently being paid by postmasters is being
completed with a summary of findings available shortly. In cases where we can see the
type of transactions that create the outstanding balances (eg ATM, FX), it is often
impossible to determine if the balance created is Postmaster detriment unless we speak
to the PM. The outcome of these investigations will be presented to HRC in October.
30. Meetings continue with BEIS to refine the ask and to support the building of a Business
Case in order to secure funding. It is likely that the Business Case will address the overall
outstanding balance issue but ask for funding in steps for known items of
detriment/potential detriment that POL is aware of with the caveat that further ‘simple’
business cases will be presented if/when more detriment is identified.
Historical Shortfall Scheme (HSS)
31. HSS Post Offer - The Dispute Resolution Team (DRT) is now taking on a broader range
of tasks than originally anticipated which would have otherwise been outsourced to more
costly resource, including participating in Good Faith Meetings (GFM) and interacting with
POL-BSFF-138-0000004_0086
POL00458418
POL00458418
Tab 10.1 HMU Update
applicants throughout the process to facilitate favourable outcomes. This has led to 44
disputing applicants (23%) changing their response to ‘accept’ and exiting the dispute
process having received a satisfactory outcome, saving the cost and time involved in
continuing the dispute process.
32. In addition, an approach has now been agreed with UKGI/BEIS to manage claims
immediately prior to mediation, which will be implemented on a pilot ‘test case’ basis
subject to HRC (Board sub-committee) approval and similarly during the mediation
process itself.
Stamp Scheme (SS)
33. The scheme is now 100% complete in terms of offers sent; of 181 eligible claimants, 179
have received an offer, and 2 a suspension letter. Five claims remain at dispute resolution
stage but all are being progressed. Project closure activities have commenced ahead of
the resolution of the final claim.
88 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0087
POL00458418
POL00458418
Tab 10.2 Inquiry Update
POST OFFICE LIMITED
BOARD REPORT
Title: Post Office Horizon IT Inquiry: I meeting pate: I 01 November 2022
Update
Fintan Canavan: Inquiry
. _ I Director . Ben Foat: Group General
eee Kevin Hutchinson: Inquiry einumavd Counsel
Programme Manager
Input Sought: Noting
Board is requested to:
e Note the key developments that have taken place in the Inquiry programme since the last
update was provided, including as set out in Appendix 1.
e Note the current key strategic and operational considerations relating to the Inquiry
programme, and the impact that financial considerations are having on POL’s preparations.
e Note the financial update and assurance activities being undertaken in relation to the
Inquiry programme.
Executive Summary
1. POL’s opening statement: POL’s written opening statement was submitted on time on
4 October. Core Participants’ (CPs) oral opening statements were heard from 11 to 14
October. POL’s oral opening statement was delivered on 14 October. It was the last
opening statement to be heard.
2. Application for an adjournment to Phase 2 due to POL’s ongoing disclosure of
hardcopy material: The oral opening statements week began with an urgent application
by Counsel for Postmaster CPs to adjourn Phase 2 until POL’s disclosure of all hardcopy
documents relating to Phase 2 had been confirmed as complete. The Chair determined
that Phase 2 would not be adjourned, noting that the Phases were “not hermetically
sealed” and that any new evidence could be considered in later Phases. On 22 September
2022, the Inquiry asked POL to submit by 18 October a second interim disclosure
statement relating to POL’s work to date to identify, review and disclose hardcopy
documents and the work that is outstanding. The statement was submitted on 18 October.
3. Update from the Inquiry regarding the Phase 2 hearings: The Inquiry has published
a schedule for Phase 2 oral witnesses (see Appendix 2). It includes one current POL
employee, Bob Booth, scheduled for 15 November. All CPs will have the opportunity to
propose questions to be put to oral witnesses. The Inquiry’s IT expert, Charles Cipione of
Alix Partners, will give oral evidence in two sessions: Mr Cipione’s first evidence session
was on 18 October and was a walk-through of Part 1 of his expert report on the nature
and purpose of the Legacy Horizon system. No new lines of evidence were advanced in
the session and it completed a day earlier than had been scheduled by the Inquiry.
4. Preparations for Phases 2 and 3: We have managed our preparation for Phase 2-3 in
line with budget constraints, focussing on priority areas.
5. Employee witnesses: To date, we are aware of seven current POL employees who have
been asked to prepare a witness statement relating to Phases 2-4. We have been notified
of 16 former Post Office-group personnel who have received a request from the Inquiry
for a witness statement.
1
Strictly Confidential
POL Board Meeting-01/11/22 89 of 134
POL-BSFF-138-0000004_0088
POL00458418
POL00458418
Tab 10.2 Inquiry Update
@
6. Rule 9 requests: POL has to date received 25 Rule 9 requests for documents. Only Rule
9(24) is outstanding, which has a deadline of 4 November.
7. Assurance activities: A workshop was held on 23 September to review end-to-end
process maps for key activities: witness statements and hearings preparation, document
review and disclosure, and document identification and collation. Members of the
Compliance second line assurance team were present to aid their immersion and
understanding as part of assessments taking place throughout September and October.
8. Financial update and budget restrictions: We came to Board in July and secured
funding of £5.5m for Q2. The September Board approved £1.8m in further funding for
October. Following the September Board, the final Q2 position was finalised as an
overspend of £1.9m, comprising additional document review and 218 narrative, and actual
spend from July-September being applied in September. The programme is developing
options for the remaining Inquiry delivery and budget. Meetings are progressing with the
General Counsel and Chief Financial Officer, after which options will be presented to Board.
9. Confidentiality undertakings briefing note: The latest version of the POL Inquiry
team’s briefing note on the confidentiality undertakings that have been signed by POL
colleagues is contained in the Reading Room.
Report
A. Key developments and updates obtained from the Inquiry
GC Strategic overview
1. Based on the opening submissions it would appear that the primary issue which caused
these historical issues was corporate governance failure with secondary failures within the
legal system and IT. Following the opening hearings, phase 2 commenced with significant
evidence about the design and implementation failure of horizon. It is therefore essential
to the strategic vision that POL continues its focus on the opportunity in phases 6 and 7
to set out the improvements made to corporate governance, whistleblowing &
investigations, and CIJ & HIJ compliance, but also that the design and roll out of NBIT
learns the lessons from the historical issues such that they cannot be repeated again. An
updated plan on the organisation design of the Inquiry continues together with a focus on
challenging the Inquiry budget.
POL’s opening statement
2. Following Board approval, POL submitted its written opening statement by the 4 October
deadline. POL's oral opening statement, which included additional elaboration, was heard
on 14 October. It was the last of those scheduled.
3. The oral opening statements were preceded by an urgent application by Counsel for
Postmaster CPs to adjourn Phase 2 until POL’s disclosure of all hardcopy documents
relating to Phase 2 had been confirmed as complete. The application arose after the
Inquiry had shared with CPs POL's correspondence with it relating to POL’s challenges in
identifying and reviewing all potentially relevant documents from the vast amount of
hardcopy material. The application to adjourn was rejected by the Chair. He did not
criticise POL, but he did confirm that he would continue to monitor disclosure and would
not hesitate to take any step necessary to ensure CPs’ full compliance with their ongoing
disclosure obligations.
4. Relatedly, on 22 September 2022, the Inquiry asked POL to submit by 18 October a second
interim disclosure statement setting out POL’s work to date to identify, review and disclose
2
Strictly Confidential
90 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0089
POL00458418
POL00458418
Tab 10.2 Inquiry Update
@
hardcopy documents, the work that is outstanding, and a list of POL’s hardcopy
repositories. The statement was submitted on 18 October.
Update from the Inquiry regarding the Phase 2 hearings
5. Appendix 2 shows the Inquiry’s schedule for Phase 2 oral evidence and includes a link to
Inquiry YouTube channel, which carries a live feed with a short delay.
6. Onecurrent POL employee, Bob Booth, is scheduled to give oral evidence on 15 November.
He will receive legal support to re-familiarise himself with his written evidence and relevant
documents and be advised on how the process for giving oral evidence will run.
7. Our Counsel team is drafting appropriate “Rule 10” questions that may be put to oral
witnesses if the Inquiry approves. These points of clarification should be submitted 14
days in advance of the witness’ scheduled appearance. The Chair has asked CPs with
common interests to discuss questions between themselves to avoid duplication.
8. The POL Inquiry team will be circulating summaries of the Phase 2 evidence.
Rule 9 requests for documents
9. Since the last Board Report, POL has received five new Rule 9 requests:
« Rule 9(21), requesting specific documents relating to Phase 2 by 26 September 2022.
Technical issues with the Inquiry’s document transfer platform led to an extension to
29 September. POL submitted its response by this revised deadline.
« Rule 9(22), requesting documents relating to the prosecution of Ms Alison Hall by 29
September 2022. POL submitted its response by the deadline.
e Rule 9(23), requesting various historic Board minutes and schedules by 7 October
2022. POL submitted its response by the deadline.
« Rule 9 (24), requesting a list of the names, job titles and last known contact details
of all persons who worked in the Network Business Support Centre or as Horizon Field
Support Officers between 2000 and 2012 by 4 November. Our response to the request
is being progressed.
e Rule 9(25), requesting two sets of documents from historic Board meetings by 18
October. POL submitted its response by the deadline.
10. POL has responded to all other Rule 9 requests, subject to retrospective review of recently
unearthed materials. POL continues to provide supplementary disclosures to the Inquiry.
Disclosure
11. Following the application to adjourn Phase 2, we have completed reviews of hardcopy
material in Winchester (no further Phase 2 documents found and limited Phase 3) and
have commenced a review of material scanned to POL’s Omnidox platform (a sample of
500 files had a response rate of only 3%). POL submitted on 18 October a second interim
disclosure statement setting out in significant detail the status of POL’s work to identify,
review and disclose relevant hardcopy material that it holds.
12. The Inquiry continues to upload POL documents to the Provider of Documents workspace
for POL to propose commercial sensitivity redactions before the documents are disclosed
to other Core Participants. Most recently, the POL Inquiry team has reviewed a tranche of
1,192 documents within a two-week timeframe set by the Inquiry. We expect to receive
for review two further tranches of a similar size imminently.
13. The document review is carried out in accordance with a set of Guiding Principles,
developed with input from the Commercial Strategy & Planning Team and approved by
3
Strictly Confidential
POL Board Meeting-01/11/22 91 of 134
POL-BSFF-138-0000004_0090
POL00458418
POL00458418
@
Inquiry SteerCo. The process remains under review to ensure that POL can respond to
high volume uploads within tight timeframes. This is likely to involve revisiting the Guiding
Principles to ensure the right balance between risk/proportionality and available resources.
B. Key strategic considerations
Preparation for Phases 2 and 3
14. The Inquiry continues to disclose witness statements and documents relating to Phase 2.
POL’s Counsel team are reviewing the statements to propose questions for witnesses. HSF
has been instructed to assist with this work on Phase 2 with some restrictions on the
breadth of work streams to control cost. We are working with HSF and Counsel to
concentrate on the priority areas in Phase 2.
15. The Inquiry’s IT expert, Charles Cipione of Alix Partners, will give oral evidence in two
sessions in Phase 2. On 18 October, he addressed Part 1 of his report, providing an
overview of the Horizon system, including its purpose and design. On 17 and 18
November, he will address Part 2, providing his analysis. POL’s Counsel team are
considering whether POL may wish to propose questions for Mr Cipione’s second session.
POL has not yet engaged its own IT expert(s).
16.
17.
C. Key operational considerations
Support for current employees who receive a Rule 9 request
18. We are aware of seven current POL employees who have been asked to prepare a witness
statement relating to Phases 2-4. There may be other employees who have been asked
to prepare statements but have chosen not to approach POL for support.
a. One of the employees is on long term sick leave. HSF is engaging with the Inquiry to
discuss options in relation to this individual.
b. Four of the employees are being supported by HSF. Two of the statements have been
submitted to the Inquiry, deadlines for the remaining two are 20 and 25 October.
c. One of the employees is being supported by another law firm rather than HSF due to a
potential conflict of interest between POL and the individual, after adverse comments
were made by Postmasters about the individual during the Human Impact hearings.
d. One employee took the decision to prepare and submit their witness statement without
legal support. The POL Inquiry team has made them aware they can ask for assistance
with obtaining legal representation at any stage, if they change their mind.
19. Only one current POL employee, Bob Booth, has been scheduled to provide oral evidence
in Phase 2, on 15 November. The POL Inquiry team, HSF and Counsel are providing
support in his preparation to re-familiarise himself with his written evidence and relevant
documents, and to understand how the process for giving oral evidence will run.
Strictly Confidential
POL-BSFF-138-0000004_0091
POL00458418
POL00458418
Tab 10.2 Inquiry Update
@
20. The POL Inquiry team has met with GEs, GE-1s and managers from across the business
to brief them on the evidence-giving process and the assistance available, so that they
can provide appropriate support to members of their teams who may be asked to give
evidence.
Support for former employees and Executives who receive a Rule 9 request
21. POL and HSF have been contacted by 16 former Post Office-group personnel who have
received a Rule 9 request for a witness statement. Where former employees are interested
in legal representation, the POL Inquiry team and HSF have engaged with D&O liability
insurers to confirm coverage for their legal costs. The POL Inquiry team continues to
provide support through the process.
D. Assurance work and financial update
Operational processes
22. The programme has conducted an end-to-end process-mapping exercise across our key
activities: witness statements and hearings preparation, document review and disclosure,
and document identification and collation.
23. A workshop was held on 23 September to take these process maps from draft to
publication. Members of the Compliance second line assurance team were present to aid
their immersion and understanding.
24. The programme is sharing all relevant materials with the second line assurance team as
part of its health review throughout October.
Financial update
25. We came to Board in July and secured funding of £5.5m for Q2.
26. The September Board approved £1.8m in further funding for October.
27. Following the September Board, the final Q2 position was finalised as an overspend of
£1.9m, comprising additional document review and 218 narrative, and actual spend from
July-September being applied in September.
28. The programme is developing options for the remaining Inquiry delivery and budget.
Meetings are progressing with the General Counsel and Chief Financial Officer, after which
options will be presented to Board.
Strictly Confidential
POL Board Meeting-01/11/22 93 of 134
POL-BSFF-138-0000004_0092
POL00458418
POL00458418
Tab 10.2 Inquiry Update
@
Appendix 1
Programme dashboard
The following summary dashboards provide management information on Inquiry disclosures;
resourcing; progress in assuring and migrating digital and hardcopy documents; and progress
on actions against issues arising from oral hearings, external witness statements and media
publications.
Document Collation and Submission Dashboard as at 13 October 2022
218,810 94,636 23 of 25
Documents Documents Rule 9s
reviewed to disclosed to completed
date date to date
8 8 50.9m, 18 9/18 9(41)/9 43,194
Response Tracker Dashboard as at 13 October 2022
Allocations to date (255 cases) Discharged to date (193 cases)
255 36 5 a 193
Strictly Confidential
94 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0093
POL00458418
POL00458418
Tab 10.2 Inquiry Update
Appendix 2
Inquiry’s indicative schedule of Phase 2 oral witnesses
YouTube link: P% fice Horizon IT Inquiry - YouTt - has a slight delay.
Indicative Timeline - Phase 2
Evidence Week 1 — Introduction to Horizon
18 and 19 October Charles Cipione
20 October (witness 2 maybe I John Roberts [WITNO3390100)
heard on 20 and/or 21 October) _I Paul Rich
21 October Peter Coping [WITNO3970100)
Evidence Week 2 — Procurement and Executive Decisions
25 October Keith Todd
26 October ‘Anthony Oppenheim [WITN03770100)
27 October (witness 2 maybe I Terrence Austin [WITN04190100)
heard on 27 and/or 28 October) _I John Bennett
28 October David Miller
Evidence Week 3 — Corporate Knowledge
T November (witness 2 may be I Mike Coombs
beard on 15t and/or 2nd Stuart Sweetman
‘Novernber)
2 November (witness moybe I Jeremy Folkes
heard on 2nd and/or 3rd
November)
3 November Jan Holmes
4 November Ruth Reid
Jonathan Evans
Evidence Week 4 - Technical Issues
‘8 November Alan D’Alvarez [WITN04800100)
Graham Allen [WITN04780100)
‘9 November (witness 2 may be I John Simkins [WITNO4110100}
heard on 9 and/or 10 November) _I Mark Ascott [WITNO4760100]
10 November Mark Jarosz [(WITN04810100]
Peter Jeram [WITN04180100]
11 November Peter Jobson [WITN04820100)
Philip Boardman [WITN04790100}
Evidence Week 5 — Technical Issues (continued)
15 November (witness 2may I Bob Booth
be heard on 15 and/or 16 John Meagher
November)
16 November ‘Andrew Simpkins
17 and 18 November Charles Cipione
Evidence Week 6 - Govemment and Unions
22 November Colin Baker
John Peberdy
23 November David Sibbick [WITN03350100}
24 November Stephen Byers
7
Strictly Confidential
POL Board Meeting-01/11/22 95 of 134
POL-BSFF-138-0000004_0094
POL00458418
POL00458418
Tab 11.1 SPMP Device Funding D
POST OFFICE LIMITED
BOARD REPORT
Title: SPMP Device Funding Drawdown Meeting Date: I 01 November 2022
ATthae Gareth Clark, Strategic Platform Sionsave Zdravko Mladenov, Group Chief
. Modernisation Product Director. r . Digital Information Officer
Input Sought: Decision
The Board is requested to:
e Approve the Strategic Platform Modernisation Programme (SPMP) to purchase full
counter devices worth up to £48.3M.
Previous Governance Oversight
e The Device Requirements were approved by the SPM programme Board on 17 Feb 22.
e The Device Strategy was approved by the SPM Device Governance forum on 18 March
22.
e The SPM device procurement contract will be awarded to Specialist Computer Centre
(SCC) - with the Hewlett Packard (HP) as the Original Equipment Manufacturer (OEM)
by 31 Oct 22 after approval by GE on 17 August 22.
e SPMP Steering Committee agreed to this paper during its meeting on 21 Oct 2022.
Questions addressed
e What devices are being Purchased?
e How many Devices will be purchased?
e How will the devices be purchased?
e Will purchasing in tranches cost Post Office more than a single bulk buy?
What is the total forecast spend on full counter devices?
What is the proposed device drawdown plan?
What are the risks to the Device Drawdown Plan?
Report
What devices are being Purchased?
1. The SPM Programme is purchasing the following devices to deploy NBIT to branches and
replace the existing Horizon platform:
main counter terminal or Point of Sale (POS) terminal (base unit and screen)
slip and receipt printer
keyboard and mouse
barcode scanner
magnetic strip reader
oanco
2. There is more detail on the devices in Annex A.
Confidential
96 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0095
POL00458418
POL00458418
Tab 11.1 SPMP Device Funding Drawdown.
3. The current Networks strategy for Post office is to have no more than 21,000 full
counters. The SPM programme has forecast funding for 21,000 bundles of devices with
an additional 5% for spares.
4. — If the decision is taken to reduce counter numbers to below 21,000 the SPMP team will
adjust device bundle orders accordingly as long as the decision to reduce the total
number of counters has been taken and communicated to the team by Sept 23.
How many Devices will be purchased?
How will the devices be purchased?
5. The full counter devices will be purchased in tranches which align with the migration
plan and make full use of the 12 months price guarantee in the devices contract. This is
detailed in a device drawdown plan. The reason for this approach is:
a. It ensures POL gets devices at the best possible price.
b. It allows us to keep storage costs to a minimum whilst still providing some
flexibility to increase migration numbers if necessary.
c. It ensures that the large volumes of devices are not delivered until the
Implementation partner is on contract and able to manage on POL’s behalf.
Will purchasing in tranches cost Post Office more than a single bulk buy?
6. The winning bidder has offered PSot Office a 1% discount independent of the number of
devices it orders.
What is the forecast total spend on devices?
7. The total forecast spend on full counter devices is £48.3m. This value is based on
the replacement of 21,000 counters with the core equipment listed above.
What is the proposed device drawdown plan?
8. The full device drawdown plan, which will be affected by any changes in the SPM
programme, is detailed below:
When we need Description of need Order Date Cost £
Development, test, training, and
support increases plus Model Office,
Postmaster Demos and pilot site
Feb-22 devices. 140 Nov-22 307,687.80
Jun-23 Live deployment 3,000 Dec-22 6,593,310.00
Sep-23 Live Deployment 6,000 Mar-23 13,186,620.00
Feb-24 Live Deployment 6,000 Aug-23 13,186,620.00
May-24 Live deployment 5,800 Oct-23 12,747,066.00
May-24 Spares 1,050 Oct-23 2,307,658.50
Totals 21,990 48,328,962.30
2
Confidential
POL Board Meeting-01/11/22 97 of 134
POL-BSFF-138-0000004_0096
POL00458418
POL00458418
Tab 11.1 SPMP Device Funding Drai
@
9. This plan is predicated on the purchase of 21,000 bundles of devices with an additional
5% for spares. The NBIT team will inform the SPMP Programme Board and Steering
Committee of planned orders one month before the order date. This will allow other
teams, especially the Retail team, to confirm that the total order volume (21,00 device
plus 5%) is still correct and give opportunity to reduce order volume in line with counter
reductions, if required.
What are the risks to the Device Drawdown Plan?
10. Delay to approval of the device drawdown plan. There is a risk that a delay in
approving the device drawdown plan, will delay the delivery of the second bulk order of
device bundles which will need to be placed in Nov 22 to ensure delivery in Feb 23.
11. There is a global shortage of semi-conductors/components that are used in most
devices, coupled with haulage delays, therefore there is a risk to production and
availability of devices POL will need. To mitigate this risk, the team intend to place
orders for devices, after the first 2 pre-agreed orders, 6 months before they are
required to ensure delivery is made in good time to meet the deployment schedule.
12. The counter reduction initiative being run by Networks does not deliver a
reduction of counters to 21,000. The SPM programme have requested funding based
on a network of 21,000 counters plus 5% spares. At present there are 23,500 counters
in use, which if not reduced, will all need to be replaced. This could increase the funding
required by SPM.
13. There is a risk that SPM programme delays generate additional storage charges
for devices ordered 6 months before they are needed. With a programme of the size and
complexity of SPM delays are possible. The cost and reputation damage of proceeding to
deployment with an incomplete system will far outweigh any additional costs incurred for
storage of devices for longer than planned. This risk has been mitigated in the device
competition as no storage coast will be charged for the first 12 months.
Confidential
98 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0097
POL00458418
POL00458418
Tab 11.1 SPMP Device Funding Drawdown
Appendix A — SPM Devices
1.
POS unit on height adjustable stand
The new POS terminals will be an all-in-one unit with an optional height adjustable stand
or on a desk stand which can be tilted. The combined touch screen will be a 15.6”
screen.
The universally disliked combined slip and receipt printer will be replaced with a
separate thermal receipt printer and two label printers, one with blank labels for special
delivery labels and non-RMG carrier postage labels, and one for pre-printed Monarch’s
Head labels. To prevent the additional printers taking up more valuable counter space,
an ergonomically designed stacking system is included in the core device cost and will
be available for any counter where this is required.
The bespoke Horizon keyboard will be replaced by an optional slimline, but standard,
QWERTY keyboard and a standard mouse. The NBIT application will use touchscreen
commands but the keyboard and mouse can be selected by Postmasters who feel more
comfortable with keyboard input.
The barcode scanner will be wired as standard with a 2m lead to allow a long reach.
The magnetic strip reader will be attached to the screen as it is in branch today.
Ergonomic stand to hold printers and POS
Confidential
POL Board Meeting-01/11/22 99 of 134
POL-BSFF-138-0000004_0098
POL00458418
POL00458418
Tab 11.1 SPMP Device Funding Drawdown.
Zebra - ZD621 Label Printer
25K7AA HP 3:Smm Headset
LHP 29907AA Engage Receipt Printer
16) OQ HP Wired Desktop 320MK Mouse
a)
HP IRLO7AA Engage 2D Scanner and Stand
Confidential
100 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0099
POL00458418
POL00458418
Tab 11.2 External Auditor's proposed fees and terms
@
POST OFFICE LIMITED
BOARD REPORT
Title: External Auditor Appointment Fee I Report pate: I 1 November 2022
and Scope
7 Tom Lee, Group Financial . Alisdair Cameron, Group Chief
EMOErS Controller Sane Financial Officer
Input Sought: Approval
The Board is asked to APPROVE PwC's proposed fees for the 2022/23 financial year and the
acceptance of the scope and general extent of the engagement.
Presi Governance Oversight
The Audit Risk and Compliance Committee (“ARC”) recommend to the Board on 12 July
2022 that PwC be retained as POL External Auditors for the next financial year.
- Reappointment approved by POL Board on 12 July 2022, subject to the Board receiving
a further recommendation from the Audit, Risk and Compliance Committee on PwC's
fees, scope, and terms of engagement.
- 2-year contract extension agreed by GE on 12 October 2022
- Circulated to ARC by written resolution on 21 October 2022 for approval for
recommendation to the Board.
Executive Summary
PwC have performed the external financial audit for the Post Office Limited group of companies
(“POL”) for the past four years. In August 2022 PwC concluded their audit of the financial year
ended 27 March 2022 (“FY21/22”), which was the final year covered within the initial four-year
engagement terms which ended on 3 October 2022.
At the July 2022 ARC it was approved that PwC should be retained as the external auditor of
the Group, subject to POL being able to procure their services for an additional period.
Contract period and terms:
A paper was taken to GE on 12 October 2022 recommending the extension of the PwC contract
for an additiona This was approved. The extension will be in the form of a contract
modification to the initial four-year contract, which was agreed under a government CCS
framework. Thus the terms by which PwC are engaged will remain unchanged, subject to
changes in laws and regulations which will be reflected in the variation. A procurement exercise
will be undertaken in September 2023 to find a supplier for the financial year ended
Fee:
PwC have quoted a fee of c.
FY21/22 audit, and a reduction o
is driven by increased hourly charge out rates o'
professional services sector, reduced recurring audit hours driven by efficiencies in the audit
and the addition of one-off costs for the implementation of a new auditing standard, ISA 315.
The fee is in line with our expectations.
[IRRELEVAN for the FY22/23 audit, being an increase of {rs on the
from the FY20/21 audit. The net year on year increase
, in line with increases seen across the
Strictly Confidential
POL Board Meeting-01/11/22 101 of 134
POL-BSFF-138-0000004_0100
POL00458418
POL00458418
lernal Auditor's proposed fees and term:
Commercial Position:
In 2018 POL undertook a compliant procurement exercise via a CCS framework which
resulted in a contract being awarded to PwC for the provision of external audit services. This
contract was due to expire on 1 October 2022 but has been compliantly extended by four
months to allow contract negotiations with PWC for an extension to the current agreement to
be concluded and for the necessary POL governance approvals to be obtained.
A move away from PwC to a new provider would have a significant operational impact. As a
result of the outcome of the Group Litigation Order (GLO), POL finds itself in a very complex
position from an accounting perspective. This position is further complicated by changes in
government funding periods and the impact on financial statements is significantly more
complicated than it has hitherto been. PwC fully understand these complexities, but a new
supplier would need significant knowledge transfer. Given these complications POL would not
be seen as an attractive proposition for audit firms and there is the distinct possibility of few
or no bids being received if the service was tendered. It is quite likely that PwC would also
review their position in a way they would not if an extension to the current agreement was
granted.
It is Procurement’s view supported by Legal that
It is proposed that a procurement exercise is undertaken in September o in order to
appoint a supplier in good time for them to enter the audit cycle at an appropriate moment,
probably during the Summer of 2024.The timing of this exercise would further mitigate
against the likelihood of a challenge to the proposed extension.
It should be noted that the complexities which we perceive to make the audit an unattractive
(or expensive) proposition for a potential supplier will likely still remain at the time of the
proposed tender in September 2023. Time may alleviate some of the concerns, such as
progression with HSS and the Inquiry, but it may also create new concerns such as entering a
new phase of funding negotiations. As such the proposal to delay the tender is focused
around delaying the potential issues of procuring a supplier and delaying the cost impacts of
changing supplier, as opposed to resolving them.
The Procurement recommendation is to extend the current contract for a period of two years.
Request:
The Board is asked to APPROVE PwC's proposed fees for the 2022/23 financial year and the
acceptance of the scope and general extent of the engagement.
Strictly Confidential
POL-BSFF-138-0000004_0101
POL00458418
POL00458418
Tab 11.3 FY21/22 ARA Publication and Filing
POST OFFICE LIMITED
BOARD REPORT
Title: FY21/22 ARA filing Meeting Date: I 1 November 2022
ATthae Tom Lee, Group Financial Sionsave Alisdair Cameron, Group Chief
. Controller 4 ‘ Financial Officer
Input Sought: Decision
The Board is asked to approve the laying of the Annual Report and Accounts (“ARA”) at
Parliament and filing with Companies House in December 2022, for the financial year ended 27
March 2022 (“FY21/22").
Executive Summary
The FY21/22 ARA was signed on 17 August 2022. The decision was taken by the Board to
delay the laying of the ARA at Parliament and filing at Companies House until later in the
year, prior to the 31 December 2022 filing deadline. Whilst there is no requirement to review
the signed ARA ahead of filing, given the significant judgements included within the ARA and
in line with the discussion in August, this paper provides a brief overview of the primary
judgement, being the Going Concern (“GC”) position, and explains why the significant
estimates made remain valid for the purpose of filing.
Report
1. The FY21/22 ARA was signed on 17 August 2022 following ARC and Board approval. The
decision was taken by the Board to delay the laying of the ARA at Parliament and filing at
Companies House until December 2022.
2. Due to parliamentary recess dates (rising on 22 December 2022) and timeframes for
laying accounts, POL have a deadline of 1 December 2022 to provide the ARA to BEIS to
ensure it can be laid on 15 December 2022 and subsequently filed with Companies House
before the 31 December 2022 deadline.
3. Given the deadlines, management are seeking Board approval to provide the ARA to BEIS
at the beginning of December 2022 and to arrange laying on 15 December with filing at
Companies House thereafter.
4. The report outlines why management believe filing the ARA in December, without
reopening them, is reasonable.
Requirements for filing:
5. There is no requirement to revisit or reopen the ARA ahead of filing. It would be unusual
to reopen a set of financial statements once signed except in the situation of clear and
obvious error identification. Companies may choose to reopen for optional reasons, but
this is exceptionally rare.
6. The positions stated within the ARA, including the significant judgements and estimates,
are as at the time of signing and not at the time of filing.
Confidential
POL Board Meeting-01/11/22 103 of 134
POL-BSFF-138-0000004_0102
Tab 11
POL00458418
POL00458418
3 FY21/22 ARA Publication and Filing
@
104 of
7. If the ARA were reopened there would be a substantial amount of work to be undertaken
both internally and by PwC. Given the complexities around POL’s going concern (“GC”)
position, the directors would require an updated Letter of Comfort from BEIS, which is a
time-consuming process. It is highly likely that if the ARA were reopened the ARA would
be filed late.
8. Although there is no requirement to revisit the judgments and estimates made, the below
outlines the latest views, for full transparency prior to Board approval for filing.
Going Concern:
10. SH remains the primary constraint however the following points should be taken into
consideration, all of which lessen the weighting that should be placed on SH for the
purposes of GC assessment:
a. Event of default - the BEIS contract was amended prior to signing the FY21/22 ARA
such that a breach in SH is no longer an immediate event of default. Instead, POL can
work with BEIS to plan a remedy. Breaches forecasted are in individual months with SH
bouncing back thereafter, as such remediation will naturally occur in the forecasts.
b. Cross default - the amendment noted above significantly reduces the risk of a cross
default with other third parties, including Historically, cross
default was the primary concern as it would trigger a worsening of the liquidity position
with payments being expedited and funding reduced.
c. Levers — the lowest point in the forecasts is a breach of}.
upside model. During this period POL will be incurring significant change spend
in P1-P9 FY23/24), as such delays in spend or renegotiated payment terms cou e
sought. SH is a point in time assessment, being period end, and therefore should it be
required, payments could be delayed creating additional buffer. Work is currently
ongoing around supplier payment terms to identify where additional headroom could
be generated.
d. Government support - SH is a BEIS lending covenant. BEIS can waive this covenant,
as they have done in the past. It does not represent actual liquidity. It would be a
peculiar situation whereby a Shareholder, particularly one who has publicly stated its
intention to provide ongoing support, elects not to waive a covenant which would put
their subsidiary into financial difficulties, especially to the extent whereby they are no
longer a GC.
Other significant judgements and estimates:
11. Historical Shortfall Scheme (“HSS”) - the provisioning model continues to be refreshed
and the overall range of possible outcomes remains relatively consistent with the provision
as at the time of signing.
12. Overturned Historical Convictions (“OHC”) — if the provision were to be calculated now it
would be significantly reduced as a result of HMRC’s decision to make compensation
payments tax exempt and P&P providing revised estimates of expected claim numbers.
However, this does not call into question the position reported at the time of signing.
13. Postmaster Remediation - no change to the provisioning since signing.
Confidential
34 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0103
POL00458418
POL00458418
Tab 11.4 Postal Museum Loans
@
POST OFFICE LIMITED
BOARD REPORT
Title: The Postal Museum loans oe 1 November 2022
Author: fom Fee, Group Financial Sponsor: pea ie uaa Group Chief
Input Sought: Approval
The Board is asked to review the proposal regarding the repayment plan for the
an due from The Postal Museum (“TPM”) and agree delegated
ead to approve this proposal subject to agreement of final terms and
authority to
legal review.
Previous Governance Oversight
In December 2020, a letter of comfort was provided to the Trustees of Postal Heritage
Trust (PHT) following Board approval. The letter stated that POL had no intention to
exercise its right under default provisions of the Loan Agreement to require immediate
repayment of the Loan within the next twelve months and that POL would like to reach
a position acceptable to all parties that could allow PHT to continue to operate on a
going concern basis.
Executive Summary
The Post Office Limited (“POL”) is owed c. from TPM in defaulted loans (capital
only) dating back to 2013. Repayment was due to commence in 2018, however having
received no repayments POL has, for several years, been in negotiations with TPM and
The Royal Mail Group plc (“RMG”) regarding recovery of funds. Until recently no viable
options have been agreed on by all parties. The latest proposal would result in the capital
element of the loans being repaid to POL, with repaid upfront by RMG on br
of TPM and the remaining ireevaxri repaid by TPM over 10 years. Repayment of the
constitutes Iinrevevant! for provision of archive services and c.
a iby way of donation.
POL would also be required to give up its security over the C
rpe House lease.
Management believe, subject to terms being agreed by all parties and provision of certain
information and satisfactory reviews, that the proposal should be accepted. This is the
only option presented to date that a) all parties have principally agreed on and b) would
result in POL recovering the loan capital over a reasonable time frame. Given RMG’s
financial difficulties and the expectation that they would make an upfront payment, it
would be prudent to seek agreement and cashflows in a timely manner. By agreeing to
this POL would secure future access to the archive services, which are required, and
would prevent future risk of default as POL would own the cashflows. The possible
downside scenario would be in a situation whereby TPM ceases trading, as POL would
have no security over TPM assets, having given up security over the Calthorpe House
However, in such a scenario we envisage the Deed of Donation requiring POL to
r; would also be extinguished and as such future cashflow liabilities would be
Strictly Confidential
POL Board Meeting-01/11/22 105 of 134
POL-BSFF-138-0000004_0104
POL00458418
POL00458418
Tab 11.4 Postal Museum Loans
Report
1. In 2012, the Post Office Limited (“POL”) provided a loan to The Postal
106 of
34
Heritage Trust, trading as The Postal Museum (“TPM”), Repayments were due to
commence in 2018, capital and interest, however TPM have made no repayments
to date. POL retain: being the capital and interest to c. FY18/19 on the
balance sheet as a re le but provides against all other interest accrued. TPM
have a similar arrangement with Royal Mail Group plc ("RMG”), with a
capital loan remaining outstanding which has not been repaid. POL and RM
a floating charge over the Calthorpe House lease Cc
the security trustee.
POL entered into two additional agreements with subsidiaries of the TPM in 2013,
being i) a ‘Donation Deed’ which was entered into jointly with RMG and requires a
lonation to be paid by POL to the TPM group annually until 2039 and ii) an
‘Archiving Services Agreement’ which enables POL to store its archives at TPM until
2040, with the cost being c. er annum plus inflationary increase:
of archiving is deducted from the donation i.e. POL currently pays c.
archiving services and c. i tias a donation annually. An onerous co
currently recognised in respect of the Donation Deed.
POL and RMG have been in discussion with TPM for several years regarding
recoverability of the loans. Until recently TPM have maintained the stance that the
balances cannot be repaid in full within a reasonable timeframe, and as such various
options have been reviewed, such as partial repayment and reassignment of the
999 year lease TPM own over Calthorpe House. Agreement could not be reached
between all parties on any of the alternative options and this position is not
expected to change, as such the alternatives are not discussed further within this
report.
Recently, headway has been made in negotiations with TPM and RMG. The proI osal
presented to POL and for which we seek Board approval, is a repayment of :' RELEVANT I
loan balance, writing off an _interest accrued. The payment would be made
an upfront payment of y RMG on behalf of TPM, with the remaining C. jeer!
repaid by TPM over 10 years by way of reduction of donations paid by POL anni E
In exchange for agreeing to the repayment, POL will be required to give up its
security over the Calthorpe House lease, which will transfer to RMG to satisfy the .
an. RMG is expected to grant TPM a new
Strictly Confidential
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0105
Tab 11
4 Postal Museum Loans
@
POL00458418
POL00458418
Financial impact
5.
A summary of existing and proposed repayments terms is provided below:
Initial/existing
Capital Accrued Repayment Repayment- I Repayment p.a.
Interest to period Year 0 to end of term
October
= IRRELEVANT
forced a chang
repayment proposal with TPM rather
roposal has involved some difficult conversations, which have
in the TPM reserves policy (see section 7 below for further detail).
Risk Assessment, Mitigations & Legal Implications
6.
The primary drivers behind this are:
Recoverability - this is the only scenario discussed to date which would result
in POL recovering the full capital balance. All other options involved partial
payment, payment over extended periods (IRRELEVANT) or complex
arrangements around leases, which would not guarantee a return. RMG has
recently conducted an independent review, which has concluded that “TPM is
a well-run business’.
Timing - it has taken c. 3 years to get to this position, with all other options
being rejected as mutual agreement between parties could not be reached.
The agreement involves a sizable payment I I Of the loan balance) from
RMG. Given the current financial difficulties which RMG appear to be facing,
obtaining timely agreement and upfront payment would appear to be prudent.
RMG have not yet agreed to this position formally and should delays occur
they may reconsider their position.
Future default — by giving up the security over the Calthorpe House lease it
would appear to worsen POL’s security position should future default occur.
However, given the TPM repayments are by way of reduction in POL’s
donations, which would be reflected in a revised Deed of Donation, default
cannot occur thus POL effectively guarantees the cashflows.
Archive services — POL is required under the Public Records Acts to preserve
certain information and documentation. By agreeing to this revised loan
arrangement and enabling TPM to continue trading we retain the rights to
use these archive services. Alternative archive service providers have been
explored previously, however, given that for 85% of documents in archive it
is unclear whether they are held for POL or RMG, Secretary of State approval
Strictly Confidential
POL Board Meeting-01/11/22
107 of 134
POL-BSFF-138-0000004_0106
POL00458418
POL00458418
Tab 11.4 Postal Museum Loans
@
would be required to change provider. We do not know the extent of
services required and therefore the time and costs of moving to an
alternative provider are unknown. Further legal and financial analysis would
be required to establish this.
- Cease trading - should TPM cease trading in future, it is expected that the
remaining loan would become irrecoverable. By agreeing to net off the loan
repayments against the annual payment made by POL and removing the
charge over the lease there would be no security by which the outstanding
loan could be recovered. However, in such a scenario we also anticipate that
POL would be released from its requirements to make the annual donation and
as such would be released from the future cashflow commitments which would
be c. fecemwhen considering the net impact of the loan deductions. In such a
scenario the result may therefore not be a major concern for POL as these
cashflows would be freed up for future years. Note that alternative archives
services would be required, and as mentioned above, the costs of these
services are unknown.
Next steps and timelines
7. These terms are not yet finalised, however they are expected to remain
substantially unchanged assuming all parties can agree and sign within a
reasonable timescale. Managements view is that the terms should be accepted,
subject to the following being finalised and deemed satisfactory:
- Liquidity - TPM to provide financial forecasts to POL and RMG to evidence their
financial viability over the 10 year period. Initial forecasts show that TPM can
afford the cashflow reductions albeit their cashflows reserves would be
reduced from 7 months minimum to 4 months and they may need to reduce
capital investments plus repairs and maintenance should major issues arise.
- Cease trading - clarity is required from TPM on the position and implications
should they cease trading. We await finalised details, however the assumed
impact on POL is discussed below.
- Charity Commission (“CC”) and National Lottery Heritage Fund (“HLF”)
consent — In order for the Calthorpe House lease to be transferred, consent
will be required from the CC given the transfer to a connected person and HLF
will need to release their charge over the lease.
- Legal and tax advice - to be finalised in respect of the proposed agreement
by all parties.
- _RMG - similar to POL, Board approval is being sought over these terms.
Strictly Confidential
108 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0107
POL00458418
POL00458418
Tab 11.5.1 Procurement Report
POST OFFICE LIMITED
BOARD REPORT
Title: Procurement Report Meeting Date: I 01 November 2022
7 9 7 7 Alisdair Cameron, Group Chief
Author: Liam Carroll, Procurement Director I Sponsor: Finance Officer
Input Sought: Decision
Review and approval of the papers set out within the appendices.
Executive Summary
Security Payout Contract
1.
We have identified a problem with energy pay-out work. Please refer to the paper and
materials at Appendix 1.
Sourcing Strategies for Approval:
Deployment Services for NBIT System to Branches
2.
Software Reseller Sourcing Strategy
The Board is requested to approve a compliant competitive procurement be conducted
via the Crown Commercial Services Technology Services framework to select a supplier
to provide deployment services for NBIT.
The deployment partner contract will commence in February 2023 to allow the partner
to participate in the NBIT pilots and advise on the optimal rollout plan. The likely value
will be in the region of lepending on the final requirements, (which will be
outcome based). Please refer to the paper at Appendix 2.
4. The Board is requested to approve a compliant competitive procurement be conducted via
the Crown Commercial Services TePAS Framework to select a supplier to provide a
Software Reseller Services to Post Office. This service is currently provided by SCC Ltd
and expires in April 2023.
5. The total value of contacts is up to a maxim! period, with
a limited minimum commitment to spend of per annum. The fi ium value of
the reseller contract will be determined by individual vendor contracts. Each individual
software contract will be approved under its own eCAF. The sourcing strategy is contained
at Appendix 3.
1
Confidential
POL Board Meeting-01/11/22 109 of 134
POL-BSFF-138-0000004_0108
Tab 11
110 of
POL00458418
POL00458418
5.2 Procurement - Appendix 1
@
POST OFFICE LIMITED
BOARD REPORT
Procurement Report Appendix 1 -
Title: Security Payout Contract Meeting Date: I 01 November 2022
Liam Carroll - Procurement Director
. . Owen Woodley, Group Chief
Author: I / Andrew Goddard - Head of Sponsor: Commercial Officer
Payments
Input Sought: Decision
Board is requested to:
Approve a direct award for the Security Payout services to Zunoma with a contract
value of £1.6m comprising:
o Energy Payout scheme is £1.4m, (exclusive of VAT and expenses)
o Other Payout schemes £200k, (exclusive of VAT and expenses)
for a contract period 01 September 2022 until 30 June 2023.
Executive Summary
1.
To continue making payouts to customers under the Warm Home Discount Scheme and
meet our contractual obligations with utility companies Post Office needs to continue using
the current Payout Services provider Zunoma, see Procurement Risk Exception note at
appendix 1.
This proposal was approved by GE on 19" October 2022. GE has requested that an
investigation into the circumstances surrounding the use of Zunoma for the Energy Payout
service is undertaken and the findings reported to ARC once conclusion is reached.
Report
3:
Zunoma (previously Smith & Ouzman), have been operating as POL’s security print
provider since the commencement of Payouts in 2006.
The original contract was created in June 2018 and backdated to 2015. The contract
expired in July 2019. The contract had a rolling annual provision whereby Zunoma needed
to be informed of the continuation of services three months prior to the renewal date, this
did not happen.
Zunoma holds a portal where our clients upload customers information in order for the
payouts to be dealt with. The Energy Payouts were put through the Zunoma contract as
this was seen by the Business as a continuation of a BAU service.
The Energy Payouts Scheme sits under the Warm Home Discount Scheme.
Strictly Confidential
34
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0109
Tab 11
POL00458418
POL00458418
5.2 Procurement - Appendix 1
7. Alternatively, we can stop working with the current supplier, Zunoma, whilst we
compliantly reprocure this service. This would mean ceasing the current service causing
disruption to the most vulnerable customers, and breaching contracts we have in place
with utility companies such as British Gas for Payout schemes.
Risk Assessment, Mitigations & Legal Implications
8. The direct award of the contract to Zunoma would not be compliant with the Public
Contract Regulations. It is Procurement’s view that we are unlikely to receive a challenge
to this direct award. It is unclear what a challenger would gain by pursuing a costly High
Court litigation when the most likely remedy given by the court would be a declaration of
ineffectiveness. This would necessitate a re-procurement of impacted services by Post
Office that the challenger would have no guarantee of winning. The challenger could seek
damages, but this would require them to convince the court that, but for the relevant PCR
breach found by the court, they would likely have won the procurement. This would be a
high bar to get over.
9. It is proposed that a procurement exercise is undertaken to bring this service into
compliance, this exercise would further mitigate against the likelihood of a challenge to
the proposed extension
Stakeholder Implications
10. Postmasters are also paid a renumeration from the payout scheme, so disruption to the
Energy Payout services would also mean a disruption to this. The reputational damage to
POL would be significant, we would also be in breach of our contracts with the utility
companies as we would be unable to provide the services.
Next Steps & Timelines
11. Subject to Board approving the direct award to Zunoma:
e Place a contract with Zunoma for the Energy Payout service by 15 November
e Runa procurement exercise for Payout services and have a supplier in place for any
new contracts by the end of January 2023
« Report findings of the circumstances surrounding the use of Zunoma for the Energy
Payout service to ARC for their meeting on 5 December
Strictly Confidential
POL Board Meeting-01/11/22 111 of 134
POL-BSFF-138-0000004_0110
POL00458418
POL00458418
Tab 11.5.3 Procurement - Appendix 2
POST OFFICE LIMITED
BOARD REPORT
Procurement Report Appendix 2 -
Title: Deployment Services for NBIT Meeting Date: I 01 November 2022
System to Branches Sourcing
Strategy
7 4 m Zdravko Mladenov, Group Chief
Author: Chris Duddy, Procurement Sponsor: Digital Information Officer
Input Sought: Approval
Board is requested to:
« Approve a procurement be conducted via the CCS Technology Service 3 Lot 2
(Transition and Transformation) framework to select a supplier to provide deployment
services for NBIT . . .
« Length of contract will be for. with the ability to extend fo!
allow for any delays in the NBIT rollout plan. The anticipated rollout is
starting in January 2024. The deployment partner contract will commence in February
2023 to allow the partner to participate in the pilots and advise on the optimal rollout
plan
e The likely value will be in the region of depending on the requirements,
(which will be outcome based) and which are still being developed, and the final
contracted scope, contract signature is expected to be in February 2023
e Delegate contract award and finalising the terms of contract to GE
e Authorise any 2 Directors or any Director and the Company Secretary to execute the
contract
Report
e POL has the ambition to have built and deployed NBIT prior to the 2024 Christmas
peak. To achieve this POL needs to secure the services of a third party to deploy this
system, with the new NBIT application installed onto the new branch devices, across
circa 21,000 counters. This is a major and highly complex programme that must
succeed. Whilst the rollout will be carefully planned and not linear, at a macro level
21,500 counters transformed in 12 months is c. 80-100 per day. The plans are
currently being refined, but ideally the partner would be onboarded asap so that it can
support the pilot releases and help hone processes ready for the full rollout.
¢ POL needs to contract for programme management and engineering services across
the UK alongside a capability to provide help and advice for postmasters to negotiate
. bees successful bidder will be responsible for iavdware logistics (taking receipt of
equipment from the reseller), NBIT application and operating system software
installation, transportation and physical installation and commissioning of the counter
terminal hardware bundles to the Post Office Site.
e It is not yet confirmed whether additional services will be required from the successful
bidder (such as stocktake, audit or transition support from Horizon to NBIT) however,
Internal
112 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0111
POL00458418
POL00458418
Tab 11.5.3 Procurement - Appendix 2
this contract will be capable of supporting such activities if required. Finalisation of
requirements will be agreed before the tender is issued.
« It should be noted that training and enduring support (post hyper-care) is not included
in this contract. The successful bidder will be expected to work closely with internal
POL teams and DXC, the incumbent end user computing (EUC) partner.
« There is considerable process work underway in the programme, not least of which are
the hand-offs to the EUC provider and other lines of demarcation
e POL also must ensure that the postmasters are properly, carefully and empathetically
migrated onto the new system and the role of the implementation partner (the
proposed “go-to” resource for branch support) needs to be carefully defined
e The third party will need to be able to provide a blend of delivery and pastoral
expertise
Sourcing Strategy
e Following informal market feedback (see Appendix A) from recognised providers (CDW,
Insight, Verizon, DXC, Accenture and SCC) and analysis of available sourcing routes,
CCS framework Technology Service 3 Lot 2 is the most pragmatic, based on a
combination of broad supply market reach, cost, time and underlying robustness of the
pre agreed terms and conditions
e In general, the market proposed Competitive Dialogue (CD) given the need to work
collaboratively to refine requirements and a solution. However, the market recognised
the need to move quickly given the status of the Fujitsu contract and because of
competing pressures for the resource that will be needed.
e Alternative routes (frameworks) were reviewed, but only CCS Framework Technology
Services 3, Lot 2 had the right mix and reach (127 companies on the framework) of
providers and a reasonably robust set of standard terms. At 4-5 months, it will be
quicker than CD (8-12 months), will consume less SME time and will be cheaper and is
therefore the recommended route. The comparative analysis is summarised in the
table below.
as ee en
Severe peas sow wana 1 Nonny soos mises monte compete
re + coer
Fone pone tac
SST ete eenee en snes wan one on
rer cre oem nrc oer
‘Conpare Posen wl gun III I= ge tnd op ao
Sapenace wveyimeracnm
ces Tectsogy Sever 2b
vaerer ee emn en eemeets SAne teen nt age resets ope a ecg come
SS ess Rese 2 Se
1 SERA TESr a Winey sera so) 1 Revert
ee ae ee + Sothonpte ters) i ned cont tng ot
Se Sei ae
Sine Ant et a
Mioaa wre ponte tages Pod baAh aed end wd be et ie
2
Internal
POL Board Meeting-01/11/22 113 of 134
POL-BSFF-138-0000004_0112
POL00458418
POL00458418
Tab 11.5.3 Proc
‘ement - Appendix 2
@
e The intent is to procure services from one provider which will enter into sub-contracts
with others — POL does not currently have the experience or resource to manage
multiple contracts as well as multiple internal providers. POL will intensively manage
the lead supplier with dedicated resources from within the programme.
e The requirements will be designed to allow POL to award the Implementation Partner
services separately from the delivery resources should it wish to do so. Requirements
finalisation is a critical path activity. Likewise, elements can be descoped if necessary.
e The high-level award criteria are proposed to be 70% solution, 30% price.
Expected Outcomes
Broadly, the sourcing strategy is designed to deliver:
e Acontract with a leading service provider that provides POL with the best chance of
deploying the new EPOS system to time, quality and budget, against a contractually
enforceable implementation plan
« The removal, disposal and replacement of the existing Horizon equipment
e The commissioning of the system in branch
e A support capability provided to postmasters to ensure any local challenges are
addressed and overcome in a professional and timely manner.
Internal
114 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0113
Tab 11.5.3 Procurement - Appendix 2
POL00458418
POL00458418
Appendix A - Summary of Market Insight
Market Insight - Headlines
Market interest
Feasibility
Requirements and solution
Implementation Manager Role
‘Separate Implementation
Partner from Installation
Provider
Risk
Procurement Procedure
Internal
Very high, this is seen as the premier rollout of any UK customer and the ultimate reference deal
Very challenging, few have really deployed at the rate POL needs given the complexity and scale.
Concerns about dependencies on POL especially training. Plus there is a finite engineering
Fesource in the UK the services of which will need to be secured early
Requirements require careful honing in conjunction with a short list of providers,
Responsibilities and points of demarcation need to be carefully laid out
Overall, the view is to keep these together to reduce risk (and maximise revenue), however some
advice was to keep the IP roles in house, using area managers and/or a cadre of contractors
The market is acutely aware of the lack of a safety net under the “cliff edge” POL faces and this
will deter a number of possible providers, and that ideally the application build would be
accelerated. There is a general feeling that speed is of the essence
Some representatives are concerned about perceived toxicity and the risk of a repeat of the past
tissues; again this will be a deterrent. (One provider was quite clear that this could easily derail any
‘opportunity,
60% of the providers would advocate CD due to complexity and uncertainty, but also recognise
that this is time and resource consuming. Frameworks (HTE, Kent CC and TS 3 Lot 2) were
Suggested as a fall back for expediency, but acknowledge that there are limitations, as we have
found on the EPOS Buy procurement
11.5
POL Board Meeting-01/11/22 115 of 134
POL-BSFF-138-0000004_0114
POL00458418
POL00458418
Tab 11.5.4 Procurement - Appendix 3
@
POST OFFICE LIMITED
BOARD REPORT
Procurement Report Appendix 3 - Meetin
Title: Software Reseller Sourcing . 9 01 November 2022
Date:
Strategy
. tebale DPS . Zdravko Mladenov, Business
Author: Alistair Price, Procurement Sponsor: Transformation Unit Director I
Input Sought: Approval
Board is requested to approve
* a procurement be conducted via a competition under the Crown Commercial Services
TePAS Framework to select a supplier to provide Software Reseller Services to Post
Office
e Length of contracts to be 36-month term with no optional extension
« The total value of contacts is up to a maximum of £45.5m over the 36-month period,
with a limited minimum commitment to spend of £5m per annum. The final maximum
value of the reseller contract will be determined by individual vendor contracts.
Delegate contract award and finalising the terms of the contract to GE;
e Authorise any 2 Directors or any Director and the Company Secretary to execute the
contract.
Background
As Post Office Limited (POL) purchases increasing varieties and numbers of software products
and services we require continuation of an over-arching contract with a generic reseller that
provides access to software swiftly and compliantly without the need for individual competitions
for each of the 300 plus vendors used by POL. This service is currently provided by SCC Ltd
until April 2023.
Executive Summary
This document seeks approval of the recommended sourcing strategy for the procurement of a
Software Reseller for POL to enact numerous software vendor procurements through. This will
enable procurement of specific vendors technology without the requirement of constant
competition and provide services and support on billing, tooling, licence metrics and purchase.
There will be a minimum commitment to spend £5m per annum through this reseller route.
POL is committed to numerous software vendor contracts that will be purchased via this
reseller. As most software vendors operate on three-year contracts it is expected that most
contracts will be enacted via this route during the reseller contract.
The total estimated spend is between £40m-£45.5m and will be reviewed constantly by IT
Vendor management.
Strictly Confidential
116 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0115
1.5.4 Proct
POL00458418
POL00458418
ement - Appendix 3
@
The proposed contract will request the resellers relationship with the following major vendors.
These will be assessed as part of the competition:
The relative spend and value of each vendor will vary over the length of the contract. It is
anticipated that AWS, Service Now and Microsoft will increase while other providers such as
IronScales, Mimecast and Recorded Futures will decrease.
Questions Addressed
1. I What are the sourcing options?
1) FTS Restricted Procedure i.e. two-step process: 1. Qualifying, 2. RFP
2) CCS Framework — Tech products & Associated Services (TePAS)
3) Health Trust Europe Framework - COMIT2
4) Individual procurements via framework or Tender
2. What is the sourcing recommendation?
Options 1,2 and 3 are viable routes for the Reseller procurement. The procurement
recommendation is option 2 - run a competitive process via the Lot 3 of the CCS TePAS
Framework due to the experience and capabilities of the suppliers.
3. What are the procurement risks?
The following procurement risks have been identified. Although they pose a level of risk, these
are minimal and IT stakeholders have accepted these:
e It remains difficult to find a reseller who has a relationship with the estimated 100,000
software vendors.
e The scope will include AWS and Microsoft Azure spend. Whilst consumption estimates
have been agreed with Cloud office, there is a risk these costs will increase over the
contract period.
e POL has no Software Asset management system so monitoring of Software use and
licencing is a manual process.
e Handover of reseller services is likely to be a complex task given SCC Ltd involvement
with POL over five years.
Next Steps
Subject to Board approval to launch a premarket engagement exercise w/c 08 November 2022.
Strictly Confidential
POL Board Meeting-01/11/22 117 of 134
POL-BSFF-138-0000004_0116
POL00458418
POL00458418
Tab 12.1 Health and Safety Report
@
POST OFFICE LIMITED
BOARD REPORT
Title: Health & Safety Monthly Report I Meeting Date: I 1st November 2022
Martin Hopcroft,
Author: Director of H&S, Environment Sponsor:
and Business Continuity
Al Cameron,
Group Chief Finance Officer
Input Sought: Noting
The Board is asked to note the contents of the report.
Executive Summary
There has been an improvement in safety performance during 2022/23 and a reduction of
accidents when compared to 21/22 (20 vs 27). Whilst we have seen accidents reduce in Quarter
2 by 33% (8 vs 12 in Q1) we are not complacent. We share learnings from incident
investigations and best practice and continue to develop our people. Robberies remain in line
with forecast and we are seeing less Supply Chain CViT and ATM incidents across the industry.
Areas of ongoing focus include; progressing a plan to strengthen our response to customer
abuse and aggression; a security campaign in the run up to the festive period including a
‘Darker Nights’ communication focusing on support and guidance against robbery, abuse,
aggression and violence; rolling out Alcohol Breath Testing to CViT depots following a successful
pilot; providing wellbeing and mental health support to colleagues during these uncertain times
and bespoke support for potential witnesses who may be required to respond to the PO Inquiry.
Report
1. In Appendix 1, we summarise KPI performance over the last few years. We have included a
comparison at P12 with the previous 3 years, together with latest data for P6 (22/23) which
shows a reduction in accidents and lost time accidents to date compared to P6 YTD (21/22).
2. In Directly Managed Branches (DMBs), accident causation is mainly due to falls indoors,
with a marked reduction in those due to striking against objects or equipment, including
bumping into or stepping onto objects. We continue to strengthen hearts and minds culture
in DMBs by training safety champions and sharing good practice adopted by Supply Chain.
3. Government guidance advises that Covid 19 is now part of our everyday lives and will be
for the foreseeable future. We took additional steps to adapt to this new normal and treat
Covid 19 in the same way we would treat any other respiratory illness. We will monitor the
rates of infection in POL and society and will remind colleagues to follow good practice.
4. Robberies remain in line with forecast (7 vs 6), although marginally up on last year, with
FYF expected to outturn at c.91 incidents, marginally lower than the 3yr average 98 per
_ ind Security Managers are conducting unannounced visits.
There has been a 29% reduction in abuse / aggressive behaviour related incidents reported
(22 vs 31 and average 35). In P6 there were 0 CViT robbery related incidents and there
1
Strictly Confidential
118 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0117
POL00458418
POL00458418
Tab 12.1 Health and Safety Report
@
were 0 ATM attacks. Industry ATM incidents remain down on pre-Covid level and significant
decrease to c11 per month over the last 3 months compared to c60 per month pre Covid.
5. Following the HSE review to the threat of violence, robbery and abuse against colleagues,
the H&S, Retail and Security teams attended a workshop on 12" October to review
recommendations, consider solutions and progress an action plan. Actions include reviewing
the Harassment by Customer policy, clarity on zero tolerance, improving training,
simplifying and encouraging incident reporting. We are leading an inter-bank group (IBG)
initiative to benchmark best practice and improve training further over the coming months.
6. We have reviewed the Supply Chain Safety Plan and are progressing a number of initiatives
including; Alcohol Breath Testing roll-out from 17" October; enhancing the role of the Safety
Champion; rolling out a lighter secure cash box (Cennox) to depots with very high risk
routes and; an Occupational Health review of physical and mental fatigue in CViT.
7. Post Office property is statutory compliant and overall risk is low. All statutory and non-
statutory inspections are being undertaken and remedials are on track. The 3-year network
PAT test programme is progressing well with no risks of fire or electrocution being identified.
This years’ network signage surveys have identified no serious issues and external fire risk
assessments and fire door inspections are taking place to form the estate fire door register.
8. We continue to provide wellbeing support to our colleagues. Mental Health First Aiders are
receiving refresher training in November and together with People Partners, they will provide
support and raise awareness of our wellbeing resources over the coming months. Mental
health related absence has reduced in P6 (Sep) and currently accounts for 20% (25%) of
all absences and 31% (38%) of days lost. There were 67 absences / 799 days in P6 vs 76
absences / 952 days in P5. Overall sick absence remained at 3.55% in P6 (Sep) and has
reduced to 3.79% YTD (3.86%), mainly due to a decrease in Supply Chain absence.
Financial Impact
9. The financial impact of the above initiatives has been evaluated / budgets confirmed
Risk Assessment, Mitigations & Legal Implications
10. Our highest risks include; violence and abuse aimed at postmasters and employees. The
security and health and safety teams will continue to strengthen mitigation; the potential
change to our risk profile due to increasing levels of cash in the Network.
Stakeholder Implications
11. Training should be provided to new directors and, where required, directors, management
and colleagues of Group subsidiaries.
12. Information - directors should consider the H&S information that flows to the Board to
support directors, subsidiary directors and management teams carrying out their duties.
Next Steps & Timelines - Safety Sub-Committee is held 6 weekly with the next meeting
scheduled 25' October 2022. PO Board and GE reports will include updates, recommendations
and decisions made by the Committee.
Strictly Confidential
POL Board Meeting-01/11/22 119 of 134
POL-BSFF-138-0000004_0118
Tab 12.1 Health and Safety Report
POL00458418
POL00458418
Appendix 1
Safety Board Dashboard
Accidents P6 (22/23) and Security P6 (22/23)
Health & Safety 4yr Performance
Year/KPI 18/i9 I 19/20 I 20/21 I 21/22 I 21/22 I 22/23
Pi2vtD I Pi2vtD I Pi2vTD I Pi2vTD I P6YID I P6vTD
All accidents 81 70 40 50 24 20
All accidents / 1000 employees 16.9 18.6 118 15.2 73 6.0
DMB 16.7 21.0 22.7 26.9 141 9 12.72
Support 34 75 07 21 0.0 0.0
Supply Chain 42.0 33.8 15.3 235 10.5 88
Lost Time related accidents 15 10 5 16 6 7
Lost Time related accidents / 1000 34 2.6 15 49 18 21
employees
LTIFR (lost time accidents/100,000hrs) 0.184 0.150 0.083 0.281 0.212 0.242
Days lost due to accidents 245 214 28 484 247 211
Days lost / 1000 employees 51 s7 8 147 75 63
LTR (Accident days lost/100,000 hrs) 3.0 3.2 0S 85 87 73
Days lost due to robbery (assault and 0 tos 46 aa : 435,
trauma)
LTR (Total days lost/100,000hrs inc. trauma) I 6.4 48 0.7 8.5 8.8 12.0
RIDDORS (Employee) 7 2 3 6 2 3
NOTE: It should be noted that one single lost time accident increases LTIFR markedly by approx.
0.477 in POL per month, LTIFR is the number of incidents / 100,000hrs and should always be read
alongside the Lost Time Rate (LTR) which is the number of lost days / 100,000 hrs and an indication of
the seriousness of the accident.
Robbery Incidents
CVIT Incidents
2 mS OTD
ICurrent 2 Moths
test Months
Pup
As
re po PID PLP
Strictly Confidential
120 of 134
POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0119
POL00458418
POL00458418
Tab 12.2 ClJ Dashboard
@
POST OFFICE LIMITED
BOARD REPORT
Title: CI) Dashboard Meeting Date: I 1%t November 2022
ATthae Jo Milton, Senior Operational Sionsave Martin Roberts, Group Chief Retail
. Improvement Manager r . Officer
Input Sought: Noting
The Board are asked to note the Common Issues Judgment (CIJ) Dashboard containing
performance data for Period 6 (to 25" September 2022).
Executive Summary
The CIJ dashboard is created each month and provides an overview of our performance
against key metrics relating to our interactions with postmasters throughout their lifecycle.
From a governance perspective it is important that our Group Executive and Post Office Board
have oversight of this performance and crucially, are aware of any specific areas requiring
further work to enhance performance, as well as improvements in train or planned, to
remediate.
The purpose of this board report is to provide a summary of the key improvements underway
to address performance issues in those areas with an amber or red RAG status. The RAG
status for each area can be seen in Appendix One with corresponding planned improvements
shown in Appendix Two. The CIJ dashboard itself, containing detailed information for each of
the policy areas, can be found in the reading room.
Report
1. The following improvements are either underway or planned across those areas with
either an amber or red RAG status. Progress against delivery of such improvements is
monitored on an ongoing basis by the Retail team.
Training and Onboarding
2. We are aiming to increase views of training material online (P6 was 616 compared to P5
1013) by launching a new Branch Hub learning site that is more intuitive and easier to
navigate for postmasters. We will communicate this improvement and other Learning
Management System resources to postmasters as well as internal stakeholders who
have regular contact with branches and can advocate use of the new tools available.
3. The Onboarding journey duration (application link sent to contract signed) was 148 days
in P6 and our aim is to shorten this. A joint Retail and Finance working group has been
established to review each stage of the financial assessment process, one element of the
journey that takes applicants a significant amount of time to complete. We also have
plugged a resource gap by offering vacant roles to six support advisors.
4. Refresher training classroom courses were only at 39% capacity in P6. This is an
increase from P5 of 3% and we hope to increase more by promoting these sessions, via
Regional Training Leads, Area Managers and links on the new Branch Hub learning site.
Confidential
POL Board Meeting-01/11/22 121 of 134
POL-BSFF-138-0000004_0120
POL00458418
POL00458418
Tab 12.2 Cl Dashboard
@
5. Recently the % of cases resolved within 10 days has reduced to 72% (the target is
82%) due to aged cases sitting within the IT Service Desk. Recruitment is underway to
increase resource to clear the backlog.
Postmaster Complaints
Cash Management
6. The percentage of successful cash declarations has consistently been at around 88% this
year and focus is on increasing this. Further communications to postmasters detailing
the operational benefits of completing on a daily basis are planned and we are engaging
Tellermate with a view to securing a significantly discounted rate on note counters, for
postmasters.
Discrepancies and Postmaster Accounts
7. The volume of discrepancies reported by postmasters remains steady for the year, but is
still high at c. 5000 a month, with a steadily increasing value. Work is underway to
explore options to reduce this number including initiatives to improve the review/dispute
process on Horizon. Improving the frequency of cash declaration completions (see
above) will also assist us here.
8. As recovery of postmaster investigated losses has reduced, the amount that is
provisioned for these losses is increasing and stood at £23m at the end of P6. The
process for recovery of established losses is currently being reviewed and a project team
is being stood up to explore actions to enable more effective recovery of losses. This will
be in cases where thorough investigations have taken place and the discrepancies can,
on the balance of probability, be shown to be as a result of postmaster error. In
addition, we are working to notify postmasters of their account information via Branch
Hub.
Accounting Dispute Resolution
9. The volume and value of discrepancies that are sent for investigation is increasing year
on year (P6 sees a 47% increase in volume on last year). We are encouraging
postmasters to learn how to investigate themselves and introducing a new investigations
tool on the Branch Reporting Suite on Branch Hub.
Network Monitoring
10. Network monitoring cases are lower than usual due to resourcing issues, but this will
begin to upturn as there are two new colleagues currently in training who will be starting
imminently.
Confidential
122 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0121
POL00458418
POL00458418
Tab 12.2 Cld Dashboa
Appendices
Appendix 1 - Board CIJ Dashboard RAG Status Period 6
Corrections corrections
Discrepancies and Volume and value of reported discrepancies
Postmaster
and Confidence after training
Accounts Amount provisioned for postmaster balances
Training
‘Onboarding confidence after go lve available soon)
Volume and value of discrepancies received for
‘Number of views of training videos and collateral
‘capacity filled in refresher training sessions Accounting Di
9% capacity file in refresher traning ng Dispute erage days toresove
Number of complaints received
Investigated cases root cause
Postmaster
Postmaster resolved within 10 days
Top 5 themes Number of Network Monitoring cases
Volume and value of outward cash discrepancies Number of audit activities
Volume, value of shortages, surpluses and
Cash counterfeit notes
Management
Number of suspensions, with reasons and number of
reinstatements
The 4 Contract
policies
AMS PI CNA Ea Le) Number of terminations, with reasons
Postmasters
Percentage of successful cash declarations Decision reviews and outcomes
* This performance summary is work in progress. The RAG status may change In uture as we continue work to clearly define targets for each o
se key metrics
Appendix 2 - What actions are being implemented to improve
performance
‘Area Metric RAG _I Improvements planned or in place
+ New Branch Hub learning ste to be launched on 24" October and will be promoted via
Training and Onboarding Number of views of training I ___—_communications. This new site will host existing content but wil algo introduce new videos/guides.
videos and collateral YF + Continuation of promotion of BH and LMS resources to internal PO stakeholders who have regular
contact with branches
Training and Onboarding Onboarding Time (days) TTEEAI) + Joint Retait and Finance working group in place to review each stage of the FA process and
work recommend improvements.
* Otters to be made to 4 onboarding support advisors short, plugging the resource gap.
“+ Working toward tiling removal of split between non-onboarding and onboarding classrooms in
4.
Training and Onboarding % capacity filled in training
sessions
+ Regional Training Leads ere attending Regional Manager meetings each month to advocate
classroom courses with their teams.
‘+ Area Managers and BSMs to promote both eLeaming and classroom courses
+ New Branch Hub learning ste will promote link tothe classroom registration form on front page
+ Recruitment activity underway atthe IT Digital Service Desk to Increase available resource allowing
SRE PENANG the high volumes of aged cases to be gradually cleared
‘Cash management. Percentage of successful
cash declarations,
‘+ Further communications campaigns being explored, and consideration also being given as to whether
‘we ‘mandate" completion, or possibly provide more note counters to assist postmasters.
Discrepancies and iime and value of + Working with the CISO for Reta and Controls to improve review/dispute process on Horizon
Postmaster Accounts. io eancies
Discrepancies and + Established loss GE subgroup being arranged to review process and agree whether any changes
Postmaster Accounts Amount provisioned for should be made to enable greater recovery of losses.
Postmaster balances ‘+ We are working with Branch Hub to improve the way account information is shared with Postmaster
Accounting Dispute Volume and value of
Resolution discrepancies received for
investigation and
Investigated cases root cause)
Network Monitoring and Number of Network
Audit Support Monitoring cases
*+ Development work deployed into Dynamics to track incoming volume by ‘product type’. This now
provides a balanced view of incoming vs resolved which enables better root cause analysis.
+ Two new team members currenty in training
Confidential
POL Board Meetir 123 of 134
POL-BSFF-138-0000004_0122
POL00458418
POL00458418
hair - Independence
POST OFFICE LIMITED
BOARD REPORT
Title: Independence of incoming Chair Meeting Date: I 01 November 2022
Cordelia Hagan, Company
Secretariat Administrator
Rachel Scarrabelotti, Group
Author: Company Secretary
Sponsor:
Input Sought: Decision
The Board is asked to:
i. decide whether, pursuant to Provisions 9 and 10 of the 2018 UK Corporate
Governance Code, Mr Staunton can be considered independent upon appointment as
Chair notwithstanding Post Office’s business relationship with WH Smith Plc; and
ii. agree a form of language for the explanation of Mr Staunton’s independence or non-
independence. The suggested wording is set out in Appendix 1.
Executive Summary
After a formal selection process and liaison with the Department for Business, Energy and
Industrial Strategy (BEIS), Mr Henry Staunton was identified as a preferred successor to the
former Post Office Limited (POL) Chair, Tim Parker. The Shareholder provided written notice
to the Company of its decision to appoint Mr Henry Staunton as Chair of the Company on 23
August 2022.
It is proposed that Mr Staunton will be appointed as a Non-Executive Director and Chair of the
POL Board with effect from 1°t December 2022. Mr Staunton is currently the Chair of WH Smith
plc and will retire from the board of WH Smith plc on 30 November 2022.
The Shareholder Relationship Framework Document provides that POL should seek to comply
with the principles and provisions of the 2018 UK Corporate Governance Code (the ‘Code’).
Provision 9 of the Code states that, ‘the chair should be independent on appointment when
assessed against the circumstances set out in Provision 10...’.
One of the circumstances likely to impair Mr Staunton’s independence as set out Provision 10
of the Code includes *...whether a director...has, or has had within the last three years, a material
business relationship with the company, either directly or as a partner, shareholder, director or
senior employee of a body that has such a relationship with the company’.
It is for the Board to decide whether Mr Staunton is independent from the executive
management team and the company to enable him to challenge and hold executive
management to account considering all relevant facts and circumstances.
Provision 10 of the Code states that ‘where any of these or other relevant circumstances apply,
and the board nonetheless considers that the non-executive director is independent, a clear
explanation should be provided’.
Accordingly, the Board should assess Mr Staunton’s independence as_ the Board will need to
provide a clear explanation for its conclusion and minute this explanation. Moreover, where
the Board considers the Chair to be independent on appointment, the Pensions and Lifetime
Savings Association Stewardship and Voting Guidelines (2022) suggests ‘detailed and
Confidential
124 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0123
POL00458418
POL00458418
considered explanations around Director independence’ should include ‘why the company
considers that the director remains independent despite the existence of any factors which
may impair independence’.
Questions addressed
1. What criteria are used to assess whether Mr Staunton is independent?
2. I How does Mr Staunton perform against the relevant criteria?
3. If the Board determine that Mr Staunton is not independent what statements need to be
made by POL to ensure it continues to comply with the Code?
Report
4. Independence in the context of the UK Corporate Governance Code refers to a director
being independent from the executive management such that the director is able to use
their skills and experience to exercise objective judgment, provide effective challenge
within the Board and adequately hold the executive management to account. There may
be concerns that Mr Staunton may not hold the executive to account to the extent that
POL and WH Smith’s business relationship may be affected.
Legal advice sought from Norton Rose Fulbright suggested thatI
Confidential
POL-BSFF-138-0000004_0124
POL00458418
POL00458418
11. The Code operates on a “comply or explain” approach meaning that POL can comply with
the provisions in the Code or explain any non-compliance.
12. As such, any departure from Provisions 9 and 10 of the Code arising from the
circumstances of Mr Staunton’s appointment should be clearly detailed in POL’s annual
report and accounts.
Risk Assessment, Mitigations & Legal Implications
13. As the Board is already aware, POL are currently in phase 2 of the Statutory Public Inquiry.
This has attracted significant media attention and the level of scrutiny for POL may be
heightened when Mr Staunton joins POL as Chair. There could be media commentary on
whether the relationship with WH Smith will affect Mr Staunton’s ability to hold executive
management to account. There may also be observations regarding the balance of the
POL Board and board diversity.
14. POLshould consider these potential effects to its reputation as a result of this appointment
and its conclusion regarding Mr Staunton’s independence or non-independence should
form part of its explanation if there are incoming inquiries.
Stakeholder Implications
15. The Board should also consider that Post Office’s other strategic partners may have
concerns regarding Mr Staunton’s appointment.
Confidential
POL-BSFF-138-0000004_0125
POL00458418
POL00458418
Tab 13.1 Incom hair - Independence
Appendix 1
Depending on the Board’s decision as to Mr Staunton’s independence or non-independence,
please see the suggesting form of words for both cases below:
Explana'
n of Mr Staunton’s independence
The Board of Directors have determined that Mr Staunton will be independent upon
appointment to the Post Office Limited Board. In making their decision, the Directors concluded
that Post Office’s business relationship with WH Smith will not affect Mr Staunton’s
independence, objective judgement, and his ability to hold executive management to account.
Furthermore, WH Smith is only one of Post Office’s strategic partners and the Board have
determined that there are no other circumstances or relationships that can be considered to
impair Mr Staunton‘s independence upon appointment.
Moreover, Mr Staunton has extensive experience in leading and contributing to Boards and
holding executive management teams to account both as a Chair and a non-executive director.
As well as being the Chair of WH Smith plc, Mr Staunton most recent roles include being Chair
of Capital & Counties Properties Plc and Exeter University Business School.
Mr Staunton will be stepping down from his role as Chair of WH Smith plc on 30 November
2022 and will be joining the Post Office Limited Board on 1 December 2022. As such, there will
be no period of overlap in conducting these two appointments.
Explanation of Mr nton’s non-in inden.
The Directors have decided that Mr Staunton will not be independent upon appointment due to
Post Office’s material business relationship with WH Smith. The Board nevertheless maintains
that Mr Staunton is a suitable appointee to Chair the Board. In coming to this conclusion, the
Board determined that despite his non-independence Mr Staunton possesses the skills,
knowledge and experience relevant to the success of Post Office. Mr Staunton has considerable
experience in the retail sector, being the key sector in which Post Office operates, as well as
experience in leading and contributing to Boards, both as a Chair and a non-executive director.
As well as being the Chair of WH Smith plc, Mr Staunton’s most recent roles include being Chair
of Capital & Counties Properties Plc and Exeter University Business School.
Mr Staunton will be stepping down from his role as Chair of WH Smith plc on 30° November
2022 and will be joining the Post Office Limited Board on 1 December 2022. As such, there will
be no overlap between these two roles.
Confidential
POL Board Meeting-01/11/22 127 of 134
POL-BSFF-138-0000004_0126
POL00458418
POL00458418
Tab 13.2 Sealings Report
@
POST OFFICE LIMITED
BOARD REPORT
Title: Sealings Report Meeting Date: I 01st November 2022
Rubia Khanom, Company Rachel Scarrabelotti, Company
Secretariat Administrator Secretary
Author: Sponsor:
Input Sought: Approval
The Directors are invited to consider the Register of Sealings and to approve the affixing of
the Common Seal of the Company to the documents set out against items numbered 2156,
and 2158 - 2161 inclusive in the Register of Sealings.
Executive Summary
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 2156, and 2158 — 2161 inclusive in the Sealings
Register are hereby confirmed.
Strictly Confidential
128 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0127
ZZ/L1/L0-BuneeW pueog 10d
vELJO6ZL
POL00458418
POL00458418
“4
a
&
ry
iS
9
g
if
Date Created Post Office Limited Company Number o
24/10/2022 Register of Sealings 2154540 a
3
8
‘Seal Number Date of Date of Persons Attesting Destination of -
I File Ref. Sealing Authority Description of Document. . To Document Document
2156 /DS1 Form I 28/09/2022 26/09/2022 I DS1 Form relating to bw nnmoen-- S80... Property Title I Alisdair Cameron, Director and Womble Bond Dickinson and Kirsty
No. DU93456) - Cancellation of entries relating to a registered charge Rachel Scarrabelotti, Group O'Connor, Senior Legal Counsel
which was first registered by the Lender Post Office Limited on Company Secretary
07.08.2015. Deed prepared by Womble Bond Dickinson, approved by
Group Legal Director Sarah Gray and electronically signed by a Director
and Company Secretary.
2158 / 05/10/2022 03/10/2022 Dilapidations Settlement Agreement relating to 27 Northgate Street Bath Rachel Scarrabelotti, Company Karima Karger, Legal and Womble
Settlement BA1 1AJ between: Imperial Tobacco Pension Trustees Limited Secretary Bond Dickinson
Agreement (Company Number 00237979) and Imperial Investments Limited
(company number 02085046) both of 121 Winterstoke Road, Bristol, BS3
2LL (the Landlord) and;
Post Office Limited (company Number 02154540) with registered office at
Finsbury Dials 20 Finsbury Street, London EC2Y 9AQ (the Tenant)
21597 20/10/2022 17/10/2022 I Underiease relating to property at Ground Floor Shop, 15 Carfax, Rachel Scarrabelotti, Company Karima Karger (Legal) and Womble
Underlease Horsham RH12 1ER between Post Office Limited (Company number: Secretary & Alisdair Cameron, Bond Dickinson
02154540) whose registered office is at Finsbury Dials, 20 Finsbury Director
‘Street, London EC2Y 9AQ (Landlord) and St. Catherine's Hospice Limited
(Company number: 01525404) whose registered office is at Malthouse
Road, Crawley, West Sussex, RH10 6BH (Tenant).
2160 / Licence 20/10/2022 17/10/2022 Licence for alterations relating to an underlease of ground floor shop, 15 Rachel Scarrabelotti, Company Karima Karger (Legal) and Womble
for alterations Carfax, Horsham RH12 1ER between Post Office Limited (Company Secretary and Alisdair Cameron, Bond Dickson
number: 02154540) whose registered office is at Finsbury Dials, 20 Director
Finsbury Street, London EC2Y 9AQ (Landlord) and St. Catherine's
Hospice Limited (Company number: 01525404) whose registered office is
at Malthouse Road, Crawley, West Sussex RH10 6BH (Tenant).
2161 / Licence to 20/10/2022 17/10/2022 Licence to Underlet relating to ground floor, 15 Carfax, Horsham RH12 Rachel Scarrabelotti, Company Karima Karger (Legal) and Womble
Underlet
1DY between Berard John Mullen of 15 Carfax, Horsham, West Sussex,
RH12 1DY (Landlord); and Post Office Limited with company number
02154540, whose registered office is at Finsbury Dials, 20 Finsbury
‘Street, London, EC2Y 9AQ (Tenant); and St Catherine's Hospice Limited
with company number 01525404, whose registered office is at Malthouse
Road, Crawley, West Sussex, RH10 6BH (Undertenant)
Secretary and Alisdair Cameron
(Director)
Bond Dickinson
Strictly Confidential
POL-BSFF-138-0000004_0128
POL00458418
POL00458418
Tab 13.3 Future Meeting Dates
POST OFFICE LIMITED
BOARD REPORT
Title
Future Meeting Dates Meeting Date: I 01*t November 2022
Rubia Khanom, Company Rachel Scarrabelotti, Company
Secretariat Administrator Secretary
Author: Sponsor:
Input Sought: Noting
The Directors are requested to note the future meetings dates scheduled in respect of Post
Office Limited Board and Committee meetings.
2022
Date Time Meeting
Tuesday 01 November 2022 10:00- 15:30 I Board
Thursday 10 November 2022) 08:30 - 10:30 I Historical Remediation
Committee*
Monday 21 November 2022 09:30 - 11:30 I Historical Remediation
Committee?
Monday 05 December 2022) 15:00- 17:30 I ARC
Tuesday 06 December 2022) 10:00- 11:00 I Nominations Committee
Tuesday 06 December 2022, 11:00 - 12:30 I Remuneration Committee
Tuesday 06 December 2022) 13:00- 17:30 I Board
Thursday 15 December 2022 08:30 - 10:30 — Historical Remediation
Committee?
2023
Date Time Meeting
Monday 23 January* 2023} 14:30-17:00 I ARC
Tuesday 24 January 2023 10:00- 15:00 I Board
Tuesday 28 February 2023 I 09:30 - 12:30 I Additional Board to discuss the
initial review of the 2023/24
budget
Tuesday 28 February 2023 13:00 - 14:00 I Nominations Committee
1 Occurs every 2 weeks on Thursday effective 06/01/2022 from 08:30 - 10:30
? Due to NED diary clashes, the meeting on Thursday 24" November has been moved to 21* November.
3 As per previous emails, we are looking to change the December HRC meetings. Meetings scheduled on the 8" and 22
December will be collapsed into one meeting to be held on the 15" December.
* In January 2023 and January 2024, there is an Internal Audit session from 17:00 - 17:30.
Strictly Confidential
mn
130 of 134 POL Board Meeting-01/11/22
POL-BSFF-138-0000004_0129
Tab 13.3 Future Meeting Dates
POL00458418
POL00458418
Tuesday 28 February 2023 14:00 - 15:30 I Remuneration Committee
Tuesday 28 March 2023) 10:00- 12:30 I ARC
Tuesday 28 March 2023 13:00-17:30 Board
Tuesday 16 May 2023) 09:00- 11:30 I ARC
Tuesday 06 June 2023 09:30 - 10:30 Nominations Committee
Tuesday 06 June 2023 10:30- 12:00 I Remuneration Committee
Tuesday 06 June 2023) 12:30- 17:30 I Board
Monday 10 July 2023) 14:30- 17:00 ARC
Tuesday 11 July 2023 09:30- 14:00 I Board
Tuesday 11 July 2023 14:45- 18:00 Board Strategy Away Day - 1
Wednesday 12 July 2023 08:30- 17:00 I Board Strategy Away Day - 2
Monday 25 September 2023 14:30-17:00 I ARC
Tuesday 26 September 2023 09:30 - 10:30 I Nominations Committee
Tuesday 26 September 2023) 10:30- 12:00 I Remuneration Committee
Tuesday 26 September 2023) 12:30- 17:30 I Board
Tuesday 31 October 2023) 10:00- 15:00 I Board
Monday 27 November> 2023 14:30- 17:00 ARC
Tuesday 28 November 2023 10:00- 11:00 Nominations Committee
Tuesday 28 November 2023 11:00 - 12:30 I Remuneration Committee
Tuesday 28 November 2023) 13:00- 17:30 I Board
2024
Date Time Meeting
Monday 29 January® 2024) 14:00-17:00 I ARC
Tuesday 30 January 2024, 10:00- 15:00 I Board
Tuesday 20 February 2024 I 09:30 - 12:30 I Additional Board to discuss the
initial review of the 2024/25
budget
Tuesday 20 February 2024) 13:00 - 14:00 I Nominations Committee
Tuesday 20 February 2024) 14:00 - 15:30 I Remuneration Committee
Tuesday 26 March 2024) 10:00- 12:30 I ARC
Tuesday 26 March 2024 13:00- 17:30 I Board
5 In November 2023, there is an External Audit session from 13:30 — 14:00.
© In January 2023 and January 2024, there is an Internal Audit session from 17:00 — 17:30
Strictly Confidential
POL Board Meeting-01/11/22
131 of 134
POL-BSFF-138-0000004_0130
vELIOZEL
22/1 L/L0-Bunee— pie0g 10d
POL00458418
POL00458418
Board Governance Map & Forward Plan 2022/23 (1
Post Office Limited
"STANDING ITEMS FOR PRESENTATION
Items are shaded where the item or date Is tentative)
[welcome and Goncts of tnterest I Companies Ac 20063177 char veg x x x x x x x x
inte rom previous meeting Tea of Rforene Carpany Seay —[ Approval x x x x r z % x
Matters Aiing WA carpay Sectary tig i x x x x x x x
[committee reports verbal) Tear tne Cermtiee has tig x i x x x x x x
exo report Terms of Reference ceo ting & dean I __x x x x x x x x
nancial ertormance Report :
rance rertormance as Tf etre cro Noting SescinionI x x x x x x x x
TanDING FTES FOR NOTING (Wo PRESENTATION)
scheduled asa dlscusion tem brannualy,
[nctaaing vtenes and robberies reporang
neath a satety Report Tears ot peterence cro tng x x x x x x x x Ithe Diretorof Heath and Saety,
[Envtronment and fuelnene Conta
tends for neve tema
strical ates: MU and Pubic Ted and ry : " ; ,
eat Terms of Reference ad ty tng x x
[Governance Rama Fomor
Saxena wee Tear of Rterece company Secretary tg x x x x x
Ire strategic procurements scheduled as 8
Jaerovel spand over Ebay Tears of Rterence bcs Ten tg x x x stcceson tem perictealy and this tem ie
mneeeeeee! Jattended by the Director of Procurement.
ELIEAL TEMG! (annual las Oheralbe sated notes SAT
EE eae [a conaeeS ToT wl a
beget ond perernce agaist Teams of Reference cro oa x x Jeppovecn merch or sarsnon tobe
rate shureoer Soreoie,
card
Fvee-year pan Con wih i rat sproved for sbreson othe Shares
IGovernment Spending review) biliaiaiaied bias frslconiteg lin August 2022.
a ‘huis,
[auartery Deep Dive 2022/23 Buaget I ReSwes Soa Metin of cro Dicitton x x
rv yor end 31 march, cecine for hing 32
Jannua Report and Accounts Teams of Reference anc cha FO sonora x [econber nt ms st be dn aoment
Deana
Decicated strategy sessions Terms Reterece cexectne Torn I approvalor sence tor 1324.
pottnnessons
peters Peformance Sever Tete metorecor I Amen rs peice einrtani
\Governance Report (arma of
afarance revises recta
eterence rt Tears of Rterence company secretary I Approval x x
dctgetednuthoritoe)
Xeon
Deaimsbn and teow lve soc an commie vations shout be
sd and com 7 ot etree sy sere oproval of repress [oenayfecttated every te yeu fo compl
ieee ates Getteaties ee oaertee recommenced ba against bd Jwith the UK Corporate Governance Coce anc
=e recriment [Res Secr acme on poate povrnnce
on
Wend of Catoner Tne statement and recommended econ are
experence Seay & onased eto te RC oo bene cess
eminent Seenef heme Deployment / Retail & speed a ’ is usually minimal. The next approval will be
race tw eco fecared wouy 2023"
People strategy (Including cure) ee ec
epuaby puemuoy pe) Gey
POL-BSFF-138-0000004_0131
22/1 L/L0-Bunee— pie0g 10d
PELIOSEL
[succession Planning (including
Nominations Committee Evaluation a
POL00458418
POL00458418
strat
‘communications Diector
leoaraciscussion every 6 months (November anc
[succession below Board and GE level)I card Action frm 12 July 2022 I TOP Chief People Officer] Discussion ay).
ese “Terms of Reference Discussion [To be schedules
\Group Risk Policy Terms of Reference CChlet Financial Officer ‘Approval [ARC on 26th September anc Boarc en 27th
Head of Corporate Harte agreed with Al Cameron this woule
Re Jernoved trom the RCC ane ARC forware planner
Marie Molloy Email 3/20/2022 ting Jas cle not align withthe TOR. Richare Taylor
Jane Mark Cazaly were advised this woule go to
‘communications Director IGE ane Boare Instead. Annual Iter,
os ie {Group Corporate Aas,
Serica monesed stantial Terms of Reference ‘Brand ane Noting [To be scheduled.
ITEMS SCHEDULED
Darwin ‘Approved by GE on 04/05/2022 I Manager/ Supply Chain I APPrOVAl (no
ale Presentation)
CCFO/ Director of Supply IGE osth July. No longer recuires Boar
Property Strategy ‘5 Norris ema 26/05/22 Cron nese or Pereety I Oscussion ce See
Head of Legal HR/IR,
Project Assurance - Augmentations — Group Reward Direct Noting ane
Ito Re Davie Scothern Email 1/08/2022 I “Tnterim Group Chet Approval
People Officer
JRcc on t3th September, GE on 24th September,
PO control Framework Interim Group Compliance
iter bel ya Aanshu Mathur aig Oe Approve [ARC on 26th September anc Boarc on 27th
tember.
Mails strategy Implementation
update
‘chrysanthy Pispnis
commercial Strategy &
Planning Director
Noting / Discussion
{30 mins)
Ice Tactical - 2344 November
Malls strategy
lassurance Framework for the
[strategic Platform Modernisation
Programme
Boarc Recuest - Board Meeting of
29/03/22
Zéravko Mlacenov email 30/05/22
‘CCO/ Managing Director
Parcels and Malle
‘usiness Transformation
rector
Decision
(Group Chet Digital
lsoara requestes item be brought to the June
Meeting. Deterrec to July meeting
[to be confirmed.
Upcates Proposal: GE on 24th December 2022,
JRC on toth January 2023, ARC on 23r6
Panuary, Boarc on 24th January.
land sPM Teams
[sem deep ove oar Acton rom 07 une 2022 I Sr Cet Decston lobe contrmes.
[sem (decision on EFOs bu buy) I Feeree tom paper to Beare on 28) Business Transermaton I ogcsgn fro be contrac.
bettas exit programme Jet smyth Eral rm 25/30/2022 I Enterprise ous 8 Osta I Decson
Det ryt, enerpse
[Belfast Exit Funding: ealiag Berrian Cloud & 0: Decision
a ‘Transformation Director
ont presentation trom the Patton in reaponee to June Boare Transormavon
‘discussion Director Dieciaeit
epusby plemio4 FEL GEL
POL-BSFF-138-0000004_0132
PEL IO PEL
22/1 L/L0-Bunee— pie0g 10d
POL00458418
Decision Making Forums
‘Company Secretary
a
&
id
Fy
x
2
Fd
a
ayronetntegratonfxploration I tom Acton tom 12 uy 2022 [°°0{Sommerc stator] yoeng 3
iy
Boar Request enor HeetneoF I CCO/ Hansoing Oretor squealed w POL Bour Hesng 29 March
plein ented 29/03/22 roels and Mails: ome J2022. Deferred until July Boarc Meeting.
ravetigations paper ohn Batt Doha Bret Dacusson Ge 08th ay
Hite seson aso ns to a suggestion rom A
improvement development Group I Upéotes were previously eee at oo neuen [eareron at the Seterer 202: mesg to,
pene oat age IPublic Inquiry that the historical errors cannot be
feerpeenie Comacennnn weliiniernel ‘Phase 6 of the Inquiry ail ia Coie: Noting IGE Approval - 16 November 2022,
POL-BSFF-138-0000004_0133