UKGI00002501 - Post Office Limited Q2 Review - 30th June 2014.

Evidence on official site

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POST OFFICE LIMITED (POL) — Q2 Review

Monday 30 June 2014, 15.30-16:30 UG-H, 1 Victoria Street, London

Present

Roger Lowe James Baugh
Rachel James Rajesh Kedia
Richard Callard Jeremy Ankers
Tim McInnes

Peter Batten

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Financial Data

The panel reviewed the financials provided and noted that in some areas
there was a lack of consistency between budgeting processes and how some
revenues or costs are accounted for. It was noted that this is fully in line with
all accounting standards but that it does have an impact on management
remuneration and bonus thresholds. The ShEx team are working to challenge
POL on this issue but are limited in terms of levers.

Mails and Retail

The Mails section of the business had a poor start to the year despite
management taking action following the drop off in 2013/14 linked to changes
in parcel sizes. Actuals are down on both budget and year on year
comparisons, which is a concern, although POL is working on a number of
actions to address the shortfall (e.g. the ‘Metapack’ proposal to track 1* and
2"4 class post). However, there is not yet clarity on whether this will
compensate for the poor performance in the early part of the year.

Nevertheless, the ShEx team believe that POL now have a tighter grip on the
strategy for the business going forward and that Mails has a strong team in
place. The team is however maintaining a close watching brief on trading.

Project Ivy was also discussed: a pilot exercise of 400 ‘kiosks’ varying
between automatic machines, parcel drop-off points and a combination of the
two. The team noted a risk of under-delivery on this project.

Cabinet discussions

PEX(ER) (Efficiency & Reform) considered a paper which recommended
government use services available from POL without lengthy procurement
processes. This was welcomed however the output from the paper is likely to
be limited as further discussions (e.g. at Cabinet) do not now look like they
will go ahead. The possibility of a quad discussion on RM/POL was mooted.
Project Sparrow

There have been a limited number of cases where sub-postmasters have
been found guilty of criminal offences, including based on evidence from the
Horizon system. Doubts had been expressed that the system was reliable,
calling into question these convictions, however an independent report found
that there was no systemic fault. Despite this it did point to possible training
and support issues, which should be addressed by POL. A working group
was set up with stakeholders offering mediation to affected sub-postmasters if
it was considered appropriate. It is not clear how many of these cases will
enter a mediation process, given the outstanding criminal convictions and
lack of identified faults in the Horizon system.

There are concerns that Second Sight, the contractor supporting the
assessment of the cases and the potential mediation process, is not meeting
the Terms of Reference in processing applications. Recent expenditure has
been significant both on paying the panel and on reports from Deloitte and
Linklaters. Replacing the contractor has been considered but would risk
judicial review.

Issues to raise at Risk Committee

The panel considered whether Project Sparrow should be raised with the Risk
Committee. The group agreed that it should not now, but due to the
reputational risks progress should be closely monitored.

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