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Post Office Limited
Initial Complaint Review and Mediation Scheme
Overview of Horizon and branch trading practices
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Introduction
This overview has been prepared with a view to informing the reader of
the basic functions of the Horizon system and Post Office's branch
trading practices.
It is not exhaustive - there are a number of product and scenario
specific processes that are not described in this overview.
Contents
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Post office: an overview
Post Office is a commercial business with a public purpose. The
majority of its income is self-generated but it does receive
financial support from its ultimate shareholder, the UK government.
It has around 11,500 branches, sells more than 170 products and
services and employs almost 8,000 people.
Although traditionally, Post Office is thought of a place to post
mail, its branch network now provides a full range of products and
services, from financial services such as commercial / personal
banking and access to government benefits through to home
telecommunications. A non-exhaustive list of products sold by Post
Office is at
Historically, Post Office was part of the Royal Mail Group with
operations and services centrally controlled for both businesses.
In April 2012, the two businesses separated and Post Office has
since traded as a separate company.
Subpostmasters
The majority of Post Office branches are run by independent
subpostmasters and are known as "agency" branches. Subpostmasters
are, in the main, individuals who are contracted to run Post Office
branches. They are individual contractors and not employees of Post
Office and their position is similar to that of a franchisee.
A subpostmaster does not need to render personal service - they may
employ "assistants" to conduct branch business. In some cases, a
subpostmaster may employ a manager to run his/her branch and may
have minimal personal involvement in day-to-day operations. The
employment of assistants is the subpostmaster's responsibility.
Where an activity is said to be undertaken by a subpostmaster, this
activity could also be undertaken by an assistant in most cases.
Each subpostmaster owns (or leases from a third party landlord) the
premises for which the branch is run. Other than setting minimum
standards from the premises (in terms of legal ownership rights,
physical security, etc.) it is the subpostmaster's responsibility
to provide the branch premises.
Typically, the premises will be part of an existing business like a
local shop or café. This existing business is typically referred
to as the "retail business". Part of the premises is given up to
transacting Post Office business and the Post Office equipment,
cash and stock is generally kept separate on the Post Office side,
away from the retail business, although the new “local model” which
has been introduced as part of the Network Transformation Programme
(see paragraph 8 below) has changed this position.
In terms of transacting Post Office business, the subpostmaster is
an agent of Post Office. In legal terms, Post Office business is a
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transaction between the customer and Post Office Limited, with the
subpostmaster acting as Post Office's agent to complete the
transaction. As the subpostmaster is not undertaking business in
his own name, all the cash and stock held at a branch are owned by
Post Office. In effect, the subpostmaster is a steward of this
cash and stock, and although it is under the subpostmaster's
control, it is not owned by the subpostmaster.
Other branch types
9.
10.
Crown - There are around 300 "Crown" branches that are directly
owned and run by Post Office. The staff at Crown branches are
employees of Post Office Limited and the branch is run by an
employed “branch manager” rather than a subpostmaster. The
operating procedures at Crown branches are largely the same as
those at agency branches. Further information is available at
paragraph &# below.
Multiples - Sometimes branches are located in much larger
businesses such as Cooperative convenience stores or WH Smiths.
These larger businesses tend to have multiple branches and are
therefore called "multiples". The operating procedures at multiples
are largely the same as those at»agency branches.
The Network Transformation Programme
ul.
The Network Transformation Programme (NI Programme) that is
currently underway is seeking to change the way that Post Office
services are offered in branches.
Under the NT Programme subpostmasters can [apply?] to transfer to
either a “main branches model” or “local branches model”. The main
branch model continues to offer a dedicated Post Office counter
which is)physically separated from the subpostmaster's own retail
business. The local branch model fully integrates Post Office
services within the retail business so that subpostmasters can
offer Post Office services from the retail counter rather than a
separate dedicated Post Office counter. This often means that Post
Office services can be offered for much longer hours than before,
in many cases from early morning until late at night, seven days a
week.
. To complement the NT Programme, Post Office has also set up a Crown
Transformation Programme to increase revenue, improve customer
experience and control costs of Crown branches (Crown branches
being owned by Post Office as described at paragraph xx above).
The National Federation of Subpostmasters ("the NFSP")
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14, The NFSP is the organisation recognised by Post Office to negotiate
on behalf of subpostmasters nationwide. It looks to improve the
pay and conditions of service for subpostmasters. It also
negotiates with Post Office on the payment for all services and
products transacted over a Post Office counter. The NFSP works
closely with Post Office on a range of other issues including post
office security, operational systems and technology.
15, The NFSP provides a range of services offering support, advice and
information to its members. Its monthly magazine, "The
Subpostmaster", provides up-to-date information on issues affecting
subpostmasters. A 24-hour helpline gives advice on contract /
employment issues.
16. Representation and guidance is available from the NFSP in the event
of disputes with Post Office. Subpostmasters have access to local
support through local branches of the NFSP and its Executive
Officers. The NFSP also runs a Benevolent Fund providing financial
support to subpostmasters in need.
Subpostmaster's contract
17, The subpostmaster's contract has)been subject to several revisions
over the years, most recently in connection with the NT Programme.
However, the coréIprinciples have generally remained unchanged. The
majority of subpostmasters currently provide services to Post
Office under the 1994 issue of the standard subpostmaster contract
(as amended from time to time). The terms of the subpostmaster's
contract are jointly drawn up by Post Office and the NFSP and the
NFSP approves all subsequent variations to the contract.
18. Under the standard subpostmaster's contract, subpostmasters are
remunerated based)on a combination of fixed and variable sums
calculated according to the volume of business that they transact.
19. A subpostmaster also has responsibility for the safekeeping of Post
Office's cash and stock. A subpostmaster is therefore liable for
any loss of cash or stock in their branches if that loss is caused
by their carelessness, negligence or error (clause 12(12)) or by
the carelessness, negligence or error of their assistants (clause
15). If cash or stock is lost by the fault of the subpostmaster,
the subpostmaster is obliged to reimburse Post Office for that
loss. The way that losses can occur is set out in section
20. The allocation of risk for the loss of cash or stock between Post
Office and subpostmasters is not unusual. It mirrors standard
retail franchising contracts, where the “franchisee” runs his/her
business under the “franchisor’s” brand and bears the risks
associated with that franchise. In the case of Post Office, it
operates a network of over 11,500 branches and in 2012-13 its cash
supply chain collected and delivered more than £42billion of cash,
coin, foreign exchange, secure stock (stamp, postal orders etc) and
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transactional stock (government forms and leaflets). Therefore it
bears substantial risk in terms of its reputation and financial
liability and, as a result of the agency relationship Post Office
has with subpostmasters, some of that risk is passed down to
subpostmasters who on a day to day basis are selling products and
handling customer monies.
21. Serious errors by subpostmasters can result in a subpostmaster's
contract being suspended and/or terminated, and/or action being
taken against the subpostmaster (or their assistants) through the
civil courts to recover any related loss.
22. Where Post Office discovers evidence of criminal wrongdoing, Post
Office may exercise the right to bring a private criminal
prosecution, which right is available to all companies and
individuals. Typical criminal prosecutions are for fraud, theft or
false accounting (where a subpostmaster has declared transactions
or stock or cash levels within the branch which the subpostmater
knows are not true). Post Office sometimes refers these
prosecutions to the police/national prosecution service (being the
Crown Prosecution Service in England and Wales and the Procurator
Fiscals office in Scotland). However, in the vast majority of
cases, Post Office undertakes)a private prosecution of the
subpostmaster.
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Horizon and branching accounting
Horizon
23.
24.
2s.
26.
Horizon is the electronic point of sale IT system used in all Post
Office branches. In 1995, following a competitive tender process,
Post Office commissioned the Horizon system (“Horizon”) from the
company now known as Fujitsu Services Limited. Horizon is
accredited by Payment Card Industry Data Security Standard and Iso
27001. It encompasses the following elements:
23.1 both bespoke and of-the-shelf software packages which have
been designed to allow Horizon to fulfil the needs of Post
Office and subpostmasters;
23.2 the computer hardware and communication equipment which is
installed in each Post Office branch including the touch
screen counter terminal and printers;
23.3 the central data centres where transaction data from each
branch is stored;
23.4 the control_and monitoring systems; and
23.5 the testing and training systems.
Today, Horizon is used by more than 68,000 users across 11,500 Post
Office branches.
Horizon is therefore more than the IT infrastructure used by Post
Office and in all Post Office branches to undertake all
transactions (from selling lottery scratch cards to cash
withdrawals and currency exchange). Horizon stores all
transactional data undertaken at each counter in every branch.
Each terminal communicates with Post Office Data Centres via a
secure communication line with a back-up communication system and
in order to communicate Horizon must be ‘online’ on the internet.
This data is stored by Post Office for a period of seven years in
line with data retention policies.
In 2010, Post Office rolled out “Horizon Online” as part of its
Horizon Next Generation (often referred to as "HNG-X") Programme to
provide a simplified network based on the centralised processing of
data. This programme offered the use of modern technologies,
easier integration and speedier future development as well as the
potential to deliver significant savings. The main changes were
“behind the scenes” and affected the service provided by Post
Office Data Centres, field service and telecommunications.
. The main roll out of Horizon Online began in June 2010, following a
pilot involving 1,422 branches, and completed in September 2010.
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Branch accounts
28.
29.
30.
In essence, Horizon is an electronic accounting system. It tracks
every transaction made in a Post Office branch and logs the levels
of cash and stock held in each branch. The branch's accounts are
stored on and through Horizon, allowing the amount of cash and
stock held in the branch to be looked up at any time.
The system's core principle is that of double entry recording i.e
every entry must have a corresponding and opposite entry so as to
“balance” the account. For example, if a product is sold for cash
this would in most cases result in a reduction in a branch's stock
levels of that particular product line and a corresponding increase
in the amount of cash recorded as held at the branch.
The effect of this double entry system is that an input in one part
of the branch's accounts can cause corresponding changes in other
parts of the accounts.
Example:
The levels of stock held ina branch can be manually adjusted. A
reduction in stock will however increase the amount of cash by the
same value as Horizon will assume that the stock has been sold.
So if the amount of first class stamps recorded on Horizon is
manually reduced by £10,.the amount of cash recorded on Horizon is
automatically increased by £10.
If this reduction in stamps was incorrect (say it was done by
accident), when the amount of physical cash actually held in the
branchis then compared to)the amount of cash recorded on Horizon,
the branch will be £10 short and will be showing a loss of £10 in
cash. In this way, the error in accounting for stamps has migrated
across the accounts to manifest as a loss of cash.
However, the branch should also now be actually holding £10 more in
first class stamps than that the amount of first class stamps shown
on Horizon. This creates a "surplus" of stamps physically in the
branch.
In this scenario, there is therefore no net overall loss. The
error can be corrected by manually increasing the value of first
class stamps recorded on Horizon by £10, which will then
automatically decrease the amount of cash recorded on Horizon by
£10 (as Horizon will assume that as there are now more stamps in
the branch, those extra stamps must not have been sold). This will
bring in line (or "balance") the branch's accounts recorded on
Horizon with the actual cash and stock holdings in the branch.
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Processing transactions on Horizon
31.
33.
In simple terms, most customer transactions are processed as
follows:
31.1 A customer approaches the branch counter and requests certain
transactions.
31.2 The subpostmaster selects the appropriate product or service
on the Horizon terminal and, if necessary, inputs the value of
the transaction (eg. cash withdrawal from a bank account of
£100).
31.3 This process is repeated for each individual transaction
requested by the customer (eg. at the same time as the cash
withdrawal, the customer purchases £10 of stamps).
31.4 Horizon groups the individual transactions together in a
"basket" of transactions and displays the net amount to be
paid to the customer or which needs to be taken from the
customer (eg. in the above situation, the net cash due to the
customer is £90).
31.5 If payment is to be taken from the customer, the subpostmaster
selects the payment method (eg. cash, cheque, debit card,
etc.).
31.6 The subpostmaster takes the payment from the customer or pays
out cash to the customer as required.
31.7 The subpostmaster completes the transaction on Horizon which
closes that basket, ready for the next customer, and updates
the branch's cash and stock records on Horizon (eg, in this
scenario, the branch's cash will have decreased by £90 and
stamps by £10).
. There are exceptions to the above due to the specific accounting
requirements of certain products (eg. Lottery transactions must be
transacted on the separate national lottery terminal and Horizon is
then updated later in the day).
There may also be various other steps that the subpostmaster needs
to take to complete the transaction which are specific to the
product in question (eg. completing and sending off various
receipts and paperwork).
Reconciliation with clients
34,
A number of the products and services available at Post Office
branches are provided by third parties - see the product list at
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section MBBRBNM. These third parties are commonly referred to as
"clients".
. When a client product is transacted, details of this transaction
are communicated to client. Sometimes, this reconciliation is
conducted in real time, and sometimes it is conducted at a later
point. Post Office is then liable to account to the client for the
transaction value (or vice versa). This interconnectivity with,
and the transfer of information and records to and from, clients is
part of Horizon's functionality.
Example:
At Post Office branches, a customer can deposit cash in or
withdraw cash from his/her bank account with a number a major
banks (eg. Lloyds, Santander, etc.).
If a customer wishes to withdraw £100 of cash from an account,
the Horizon system connects to the client's computer banking
system to confirm that the cash is available for withdrawal.
Once authorised, Horizon will tell the subpostmaster to proceed
with the transaction and to give £100 in cash to the customer
(assuming that there are no other transactions in the basket).
The amount of cash recorded inthe branch's accounts on Horizon
will be automatically reduced by £100 to reflect the withdrawal.
This way the branch's accounts are kept in balance with the
amount of cash actually on hand.
Likewise, the customer's account with the client bank will be
debited £100.
At this point, Post Office is out of pocket: it has paid out
£100 in cash to the customer but not received £100 from anyone.
There is however a later reconciliation between the Horizon
transaction records and the client bank's transactions records.
Assuming that there is no error or discrepancy, the bank will
then pay the value of the withdrawal (ie. £100) to Post Office.
This process would happen in reverse for a £100 deposit into a
bank account, with the result that the cash position on Horizon
at the transacting branch is increased by £100, the branch
holding £100 more cash on hand and Post Office making a later
payment to the client bank of £100.
Remittances
36.
Branches send or receive cash and stock (which includes customer
cheques as cheques are classed as a stock item on the Horizon
accounts) to and from Post Office central processing centres. This
movement of cash and stock is called a "remittance" (and is often
referred to as "remming in" or "remming out").
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3
4
4
0.
. Post Office monitors the cash levels of each branch. Branches are
either classed as “cash surplus” or “cash deficit” in terms of cash
management. Those branches that are classed as cash surplus receive
more customers who make deposits (eg. by making cash deposits to
bank accounts or by buying products with cash) than customers who
require cash withdrawals. For example, cash surplus branches tend
to be in areas where there are lots of business customers making
large deposits but not many benefit customers making withdrawals.
These branches do not require cash remittances to be sent to the
branch from Post Office as they will have a net inflow of cash from
customers. These branches are however required to return cash to
their nominated Post Office cash depots via a Cash Vehicle in
Transit (a secure means of transporting cash) in order to prevent
the branch holding too much cash on site. Post Office cash depots
are placed in geographical locations around the UK and each branch
will be “tagged” to a particular depot.
. Cash deficit branches are those where the money deposited by
customers to the branch does not cover the amount that the branch
has to pay out. These branches rely on Post Office cash depots to
send cash to the branch in order to ensure that there is) sufficient
cash in the branch to meet its needs.
. Post Office’s Retail Cash Management team are responsible for
monitoring the cash levels within the branch network to ensure that
branches have enough cash to serve customers. Information is also
taken from branch’s daily cash declarations to declare to the Bank
of England how much cash is held by Post Office branches. This is
because the cash that sits within branches is loaned to Post Office
by the Bank of England (and interest accrues on the loaned sum).
The decision on how much cash a branch needs to rem in or out is
determined by Post Office’s Flexible Planning System which is an IT
SAP-based software tool used by the Retail Cash Management team. In
essence, it calculates the cash declaration figures that are
entered into Horizon by subpostmasters and compares this with the
sales information. It also takes account of the average
transactions occurring over the past 6 weeks trading history to
identify how much cash the branch should return or send back on
their next scheduled cash delivery. This information is
communicated to subpostmasters via Horizon which will show a
Flexible Planning Advice Note. The subpostmaster has the option to
amend or cancel the cash that is planned to be returned or sent to
the branch by contacting the Retail Cash Management team.
. Where cash is to be remmed out to Post Office, the branch is
responsible for placing sufficient cash into a remittance pouch,
entering the amount that is being remmed out onto Horizon and then
either handing the remittance pouch to the Cash in Transit Driver,
or sending it back to Post Office via Royal Mail Special Delivery.
This will decrease the amount of cash recorded in the branch
accounts on Horizon.
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42.
43.
Where cash is remmed into a branch, the cash remittance is sent by
Post Office to the branch either via a Cash in Transit Driver or
via Royal Mail Special Delivery. The branch is responsible for
checking that the remittance pouch contains the amount of cash
stated on the remittance and then logging the receipt of cash on to
Horizon. This will increase the amount of cash recorded in the
branch accounts on Horizon.
A similar process is used to rem out customer cheques received by
the branch. When a customer pays by cheque, the total aggregate
value of all cheque stock held by a branch is increased on Horizon.
Cheques are then remitted in/out by a subpostmaster to Post Office
on a regular basis which reduces the value of cheque stock recorded
on Horizon. Post Office then takes responsibility for putting the
cheques into the banking system and recovering payment from the
customer's bank.
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Branch reporting and management
Reporting
44, Subpostmasters are required to run and review in-branch reports to
ensure that the branch is functioning effectively and to allow Post
Office to monitor cash and stock levels against its records. This
includes:
44.1 Daily Cash Declaration - staff at each branch are Irequired Ito
count and declare the cash stored in each stock unit at the
end of each day (for explanation of stock units please see
paragraph ##). The actual cash on hand is input onto Horizon
by the subpostmaster or his/her assistants. Horizon then
shows any "discrepancy" between the cash on hand and the
amount of cash that should be in the branch in order for the
branch to balance.
If a discrepancy is)identified then the cash should be
recounted and the paperwork re-checked. If there has been an
error in the counting of the cash, then the cash should be re-
declared. [Transaction and event logs plus a balance snapshot
can be printed from Horizon to check for any errors or
amendments which may needed. It is also best practice to open
and check any stock and cash pouches made up ready to return
to Post Office in case there has been any error when filling
the pouches.
44.2 Weekly Balance - It is recommended that every week, a branch
undertakes a full cash and stock count. The actual amounts on
hand of cash and stock can then be compared to the figures
recorded in Horizon, This helps the branch with identifying
and correct any discrepancies.
Weekly discrepancies can also be temporarily moved into a
"suspense" account by a subpostmaster. This is a separate
line in the branch accounts which records any losses or
surpluses so that the daily trading accounts can be put into
balance. Amounts are typically held in suspense to allow the
subpostmaster time to try to resolve the discrepancy.
The Daily Cash Declaration and the Weekly Balance are tools
for the subpostmaster to use to manage their branch.
Declaring a loss or surplus through either of these reports
does not trigger any action by Post Office.
44.3 Monthly Trading Period Rollover - This is similar to the
Weekly Balance but is mandatory every month. It also requires
any discrepancies (including those put into suspense during
the month) to be resolved. This process is also called
"rolling over" or the "end of trading period" process. At the
end of the process, the subpostmaster must print off and sign
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[APG3]: Mandatory or optional?
‘Commented [AP62]: What are these - please describe~
suggested that we speak to Fujitsu for wording
J
‘Commented [AP63]: What does this mean? suggested that we
speak to Fujitsu for wording
‘Commented [AP64]:. How is this done? Does the SPMR need
consent for FSC to do this?
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a "Branch Trading Statement". This statement confirms that
the cash and stock shown in the accounts reflect the cash and
stock held in the branch (with any discrepancy having been
declared - see below). If a branch does not rollover it does
not need to address cash/stock discrepancies or transaction
corrections. However, the integrity of the data held on Commented [AP65]: How are these discrepancies then }
Horizon may become compromised and if a rollover does not addressed?
occur it is likely that Post Office will intervene through its
Services Management team.
‘Commented [AP66]: We cannot say that data is compromised,
please can you provide a more detailed explanation so that we
can use more appropriate language
44.4 Mandatory daily and weekly “cut off routines” are in place in
to enable branches to validate transactions and to ensure that
the paper records match Horizon. This also assists to identify
errors. For example, validating the physical cheques held in
branch (as against Horizon’s records) to send to clearing or
banking summaries to send to Santander. Validations of
physical paperwork against Horizon records can detect errors
or omissions, for example, if a cheque transaction has
incorrectly been recorded as a cash transaction on Horizon.
44.5 Subpostmasters can access a range of historic data (going back
60 days) through Horizons For example, transaction logs can be
searched using parameters such as product, value, user id and
date/time.
Resolving surpluses or losses of cash or stock
45. If following the monthly rollover there is a shortage or surplus of
stocky the subpostmaster will do a sale or sales reversal to
correct the volume of stock shown on Horizon, making sure it
balances to the volume of stock held in the branch.
46. If following the monthly rollover there is a surplus of cash (when
the cash)on hand i.e, in branch is more than the amount of cash
recorded in Horizon), the subpostmaster is entitled to physically
remove from the branch sufficient cash to bring the branch back
into balance, This excess cash then becomes the subpostmaster's
property and they may do with it as they wish. Often
subpostmasters keep surplus cash in a separate location (like the
retail business safe) and then use this cash to balance out any
subsequent shortages.
47. If following the monthly rollover there is a shortage of cash (when
the cash on hand is less than the amount of cash recorded in
Horizon), Horizon presents the subpostmaster with three options:
47.1 Make good - the subpostmaster can elect to put additional cash
into the branch from their own personal funds to make up the
shortage. The subpostmaster can for example elect to put a
cheque into the branch from their own personal funds to make
up a shortage.
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47.2 Settle centrally and pay - the shortage is transferred to the
subpostmaster's personal account with Post Office. The cash
figure on Horizon is reduced to bring it in line with the
actual cash on hand at the branch. However, the subpostmaster
personally owes the cash loss to Post Office as a debt. This
debt can be repaid by either (a) a direct payment from the
subpostmaster to Post Office or (b) by deductions from the
subpostmaster's remuneration.
47.3 Settle centrally and dispute the shortage - if the
subpostmaster believes that the shortage was not his/her fault
or could be resolved through other means (see below), then the
debt will be suspended to allow time for the shortage to
investigated and remedied. The subpostmaster disputes a
shortage by contacting the Network Business Service Centre,
Cash Centre (for remittance disputes) or the Finance Service
Centre ("FSC") at Post Office to have the debt suspended
pending an investigation.
Transaction corrections
48.
49.
50
The FSC (often referred to as “Chesterfield” by subpostmasters
because of its geographical location)is Post Office’s behind the
scenes account processing centre. It provides daily services to
clients, branches, multiple partners and customers.
Transaction Corrections (“TCs”) are transaction adjustments sent by
the FSC to branches when errors are found. Even if the branch's
accounts are balancing (ie. there is no discrepancy between cash
and stock on hand and the cash and stock levels on Horizon), it may
be that the branch has processed transactions erroneously or in a
way that causes a Post Office client to refuse to reconcile the
transaction with Post Office, thereby causing a discrepancy.
. TCs can be)issued for a wide range of issues resulting from matters
such as errors or omissions in data entry, such as mis-keying,
forgetting to enter data, failing to close a customer basket from
previous customer session, delays in sending cheques for
processing, incomplete cheques, bounced cheques and card payment
issues. In 2012/13 the most common reason for TCs being issued
to branches was due to "cash remittances from branch".
Example:
A branch records remitting out £100 in cash and sends the cash
pouch to the cash centre. However, upon opening the cash pouch at
the cash centre the pouch contains £110. This creates a discrepancy
at the cash centre and (assuming the branch is otherwise balancing)
the branch will generate a £10 shortfall during the next cash
declaration. The FSC will raise a credit transaction for the
branch. In order to resolve this from a double entry accounting
perspective, the branch has to increase remittance out totals by
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51.
54.
£10 and reduce the derived cash position at the branch by £10. The
branch should then balance.
Due to the fact TCs are often generated due to a discrepancy
between Horizon and a client's records, there can be a time lag
between the error occurring and the TC being issued.
Example:
If a customer deposits £100 into their bank account but, through a
keying in error, the branch only records a deposit of £10 on
Horizon, Post Office is reliant on the customer pointing out the
error.
In this scenario, the records on Horizon and.at the client bank
will reconcile as both will show a £10 deposit. The branch will
have a £90 cash surplus (as the branch will have taken £100 from
the customer but only recorded receipt of £10 in Horizon).
The customer may raise a complaint with Post Office directly or
could raise the complaint with his/her bank who will then contact
Post Office.
. The time taken to identify the error is therefore sometimes outside
of Post Office's control. Nonetheless, Post Office achieved its
target for 2012/13)and issued 95% of TCs within 3 months of receipt
of the error (many errors can only be identified and raised by Post
Office client’s).
. When a TC is sent to a branch through Horizon, the branch is
provided)with hardcopy evidence of how the error has occurred. TCs
are often preceded by enquiries with branch, particularly if a
large number of TCs are being sent to that branch. For example, the
FSC can make interventions by letter and telephone to obtain
further details.
Branches are required to accept a TC through Horizon before
completing their Branch Trading Statement. The branch does not have
to accept the TC on receipt (although it may be prudent to do so)
and can instead print the transaction correction narrative off and
take the necessary action within the next 60 days.
. Processing a TC often results in an adjustment to the cash or stock
position at the branch within the branch's accounts. TCs can both
debit or credit the branch's accounts. As such, a TC may not
immediately cause the subpostmaster a loss or cause any loss to the
subpostmaster at all.
Example 1:
If a branch processes a bill payment of £100 as £10 on Horizon, the
branch would see a cash gain of £90. The customer receives a bill
reminder that full payment has not been received and contacts Post
Office to resolve the issue. The error is identified and a Debit TC
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56.
57.
is issued to the branch in the next trading period because POL will
need to pay an additional £90 to the customer's service provider.
The branch processes the Debit TC which increases the cash position
on Horizon, thereby creating a £90 shortfall against the cash of
hand. This shortfall however nets off against the erroneous gain
in the previous trading period. Nevertheless, viewed in isolation,
this shortfall could be seen by the subpostmaster as an unconnected
loss.
Example 2:
A customer presents a Transcash deposit slip to make a bill payment
but it is then established that an appropriate method of payment is
not possible so the transaction is not recorded on Horizon and no
cash changes hands. However, the branch incorrectly retains the
deposit slip and does not follow the end of day procedure to
compare the slips on hand with the Horizon record of slips received
that day. The failure to conduct this check causes the
subposmaster to send the slip to Post Office, who then process the
bill payment (ie. money is paid from Post Office's account to the
customer's service provider's account).
When Post Office later reconciles the bill payment against
Horizon's records, there will be.no matching payment record in
Horizon and a TC will be sent to the branch. If the branch accepts
the TC, this willalter the branch's cash position (so to reflect
the subpostmaster's error). At the end of the trading period, the
TC's effect on the cash position will cause /a shortfall during the
trading period in which the TC is sent. This shortfall however
reflects the additional cash that the subposmaster needs to put
into their branch in order to correct the earlier error.
TCs can also be disputed with the FSC team that issued the TC. If
the TC dispute is upheld)a compensating TC will be issued to the
branch. If it is not upheld a written appeal can be made to the
relationship manager in FSC who will review the case and make a
final decision. Any payment required by the subpostmaster will be
suspended until the review is completed.
The volume of TCs issued for branches during the 2012/13 period was
84,217, with an average value of around £100 each. This is against
a backdrop of an average 2.5 billion transactions being completed
on Horizon each year.
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Crown Branches
58.
Post Office operates around 300 Crown branches that are directly
owned and run by Post Office. The staff at the Crown branches are
employed by Post Office and a “branch manager” rather than a
subpostmaster manages the branch.
. The operating procedures at Crown branches is largely the same as
the agency branches run by subpostmasters except as follows:
. Equally Crown branches are subject to audits (see [§RRI]) and if a
branch manager of a Crown branch is suspected of wrong doing Post
Office will take action, including criminal prosecution.
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Training
61.
New subpostmasters receive training prior to and after taking up
their position in branch. Training covers matters such as how to
transact products and services; reconcile the day’s transactions;
remit in and out cash and stock; despatch cheques to processing
centres. Subpostmasters are also trained on how to balance the
branch on a weekly basis and roll over in to the next balancing
period. As part of this training, subpostmasters are shown how to
verify transactions and the cash and stock on hand if discrepancies
arise, as well as how to accept discrepancies, make good any losses
and gains, and how to raise issues about errors/discrepancies.
. Post Office continually monitors and considers how best to train
subpostmasters and, as part of the current Business Improvement.
Programme which aims to improve the performance of all branches,
Post Office is reconsidering how best to train subpostmasters on
new products (currently training on new products is through
workbooks and testing through Horizon).
. Examples of the types of training Post Office has offered in the
past are as follows:
63.1
63.2
63.3
63.5
2001 - 2002 classroom training was offered to new
subpostmasters) followed by 10 to)1l days of onsite training
and support. This would be followed with one day of “follow up
balance” which is a branch Trading Statement showing the stock
and cash held in branch.
2003 = between 5 and 10)days of classroom training was offered
to new subpostmasters (the training being optional) and 6 to
10 days of onsite training and support was given depending on
whether the classroom training was attended. This would be
followed with one day of follow up balance.
2004 - 2005 - between 5 and 10 days of classroom training was
offered) to new subpostmasters (the training being optional)
and 5 to 10 days of onsite training and support was given
depending on whether the classroom training was attended. This
would be followed with one day of follow up balance.
2006 - between 5 and 10 days of classroom training was offered
to new Subpostmasters (the training being optional) and 6 days
of onsite training and support was given depending on whether
the classroom training was attended. This would be followed
with one day of follow up balance.
2007 - 2011 - New subpostmasters received 5,8 or 10 days of
training on foundation, sales and other specialised modules. 6
days of onsite training and support was provided, followed
with one day of follow up balance. In 2007 following a pilot
scheme follow-up telephone calls were introduced at intervals
of 1 month and 6 months after the branch was taken over by the
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subpostmaster, with a one day site visit taking place 3 months
after the branch was taken over.
64. A subpostmaster may choose not to attend training or only parts of
a training session if, for example, he/she has worked in a branch
previously and therefore already knows how to operate Horizon and
carry out transactions. Once initial training is provided it is up
to the subpostmaster to train his or her staff and ensure that
updates or new procedures are followed and communicated to their
staff. Equally, it is up to the subpostmaster to ask for further
training and/or assistance if it is required (please see paragraph
HR below for details of the support available to subpostmasters) .
65. In 2012, as part of the wider steps being taken to “transform” the
network, Post Office tailored its training depending on the
specific role being undertaken and rolled out further training
depending on, for example, the experience of those specific
subpostmasters, the type of contract they would be operating and
the number of employees they may have. The precise training given
to subpostmasters will therefore depend on a number of factors such
as whether the subpostmaster is completely new to the role, whether
he/she is taking over an existing branch with existing staff, the
size of the branch and the types of products sold.
66. For example, Post Office currently offers (amongst other packages)
the following packages of training to new subpostmasters:
New Post Office Local Operator
66.1 AS part of the NT Programme (see paragraph #® above) Post
Office created the New Post Office Local Operator model for
new subpostmasters (along with the New Main Operator model).
The contract between Post Office and subpostmasters under
these new models is different to the historic contractual
relationship, the main difference being a shift to variable
remuneration.
66.2 Subpostmasters operating under a New Post Office Local
Operator tend to have large retail businesses which sit
alongside the Post Office and so, for example, the
subpostmaster will agree to operate the same opening hours for
the Post Office as for the retail business.
66.3 Prior to the transfer/conversion of a branch to a new
subpostmaster 3 hours of distance learning is offered to the
subpostmaster and their staff. This includes a written
Foundation Module consisting of compliance for standard Post
Office products.
66.4 The subpostmaster is then offered 3 days of Counter Training
Office (CTO)classroom training. Following the classroom
training it is the responsibility of the subpostmaster to
feedback to their staff. However, if the subpostmaster is
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66.5
66.6
66.7
66.8
employing 6 or more members of staff, Post Office will offer
spaces on the course to up to 50% of the subpostmasters staff.
Post Office schedule the equivalent of 1 days’ training
(normally split over 2 days depending on availability) for
office set-up. This includes matter such as setting up Horizon
log-ins; ensuring the pinpad for payment is set up correctly
and connected to Horizon; connecting hardware such as
printers; checking stock and cash and entering onto Horizon
and discuss matters such as security in open plan
environments. Following the office set-up a one day induction
is offered to the subpostmaster and all members of staff.
In addition a comprehensive training guide is sent to the
branch for the subpostmaster and all staff to use, the
following onsite training and support is offered to
subpostmasters:
(a) 6 days if the subpostmaster has 1-2 members of staff;
(b) 7 days if the subpostmaster has 3-4 members of staff;
and
(c) 8 days if the subpostmaster has more than 5 members of
staff.
Following completion of the onsite training a follow up
balance is/arranged 7 days later to address any issues that
have arisen in completing transactions and using Horizon
After a further 1-2 weeks the Field Team Leader
who is the line manager for the trainer, will telephone
the subpostmaster to seek feedback on the training and
establish if further support is required.
Post Office will arrange a site visit to the branch to address
matters such as product knowledge, transactions and any
training needs at intervals of 1 month and 3 months after the
branch is transferred/converted. Post Office will also
arrange an audit 6-9 months after the transfer/conversion to
verify stock and ensure its regulatory and business processes are being properly
followed.
New Main Operator
66.9 Subpostmasters who operate under the New Main Operator model
tend to sell financial products such as insurances and life
cover as well as passports.
66.10 Prior to the transfer/conversion of the branch the
subpostmaster and their staff are provided with a Distance
Learning booklet to work through which includes 6 compliance
workbooks to complete covering anti-money laundering,
financial services, data protection, mails integrity,
dangerous goods and homephone and broadband.
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66.11A 7 day CTO class training session is offered to the
subpostmaster and up to 50% of his/her staff. It is the
responsibility of the subpostmaster to feedback the training
to the remainder of their staff. An additional day is
offered to cover non-core products for branches which will
offer such products. Following completion of this session
an engagement evening with the Sales Capability Manager is
arranged for the subpostmaster and all their staff to attend.
The Sales Capability Manager provides coaching on selling
financial products. The Sales Capability team then arrange a
2 day workshop for the subpostmaster and one member of staff
to cover sales training. It is the responsibility of the
subpostmaster to feedback the training to the remainder of
their staff.
66.12When the branch is ready to “go-live” an office set-up day is
arranged (split over 2 days) with the branch opening at 1.
00pm on “go-live” day. A Field Support Advisor (“FSA”) (see
) will attend the “go-live” day to
provide assistance (an additional FSA will attend if there is
more than 6 staff). Additional onsite training and support
is provided for 6 days following the “go-live” day and the
branch will receive a training guide, A follow up balance is
arranged 7 days after the onsite training is completed to
address any issues that have arisen in completing transactions
and using Horizon. After a further 1-2 weeks the Field Team
Leader will telephone the subpostmaster to seek feedback on
the training and establish if further support is required.
66.13 Post Office will arrange site visits to the branch to address
matters such as product. knowledge, transactions and any
training at intervals of 1.month and 3 months after the branch
is transferred/converted. Post Office will also arrange an
audit 6-9 months after the transfer/conversion. ]
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Support for subpostmasters
NBSC
7]
7
0.
. The Network Business Support Centre ("NBSC") was established on 15
December 1999 to help and support subpostmasters and their staff
with customer transactions and navigation of Horizon. NSBC can
support subpostmasters with a wide range of issues such as
providing assistance with transactions carried out through Horizon,
navigation, how to address and deal with mistakes and any issues
arising out of the weekly branch trading statement.
. NBSC is open 6.00am to 11.00pm Monday to Saturday and 7.00am to
5.00pm on Sundays and Bank Holidays. Therefore, NSBC is available
to support subpostmasters and their employees during and after the
opening hours of their branches. New NBSC staff receive a 4 week
training course and 2 week floor support. Ongoing training is
provided to NBSC staff on new products and services as they are
introduced. Through quality monitoring and coaching Post Office
identifies any gaps in graining and provide further support to
advisors.
: Post Office currently employs 70 people to sit within NBSC and
receive calls, undertake second line support (where a query cannot
be addressed during the telephone call, second line support will
liaise with Post Office product teams to source the answer) and
carry out administration roles. NBSC staff are experienced in
Horizon and how branches operate. — NBSC receives 1,700 calls a
day, 11,000 calls a week or 600,000 calls a year (based on data
obtained for 2012/13). NBSC operates a two tier escalation
process; If the NBSC advisor is unable to resolve the
query/issue with the caller, the call is escalated to tier 2 where
more expert advice will be provided. If this still does not
resolve the issue the Branch Support Team will decide if further
training or face to face branch support is required. The Branch
Support Team are an administration team who provide further tier of
support to arrange training or intervention to assist branches
outside of NSBC’s remit.
NBSC performance is measured on the time advisors take to answer
the phone, referred to as a “Grade of Service”. The target is to
answer 70% of calls within 30 seconds and to have no more than 5%
of abandoned calls (i.e. where the caller hangs up before reaching
an advisor). For complaints NBSC’s target is to resolve 95% of
complaints within 10 working days.
. In addition to NBSC, subpostmasters can access Horizon On Line Help
and call the Horizon Service Desk which is managed by Post Office’s
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Field Support
72. Post Office has a large network of branches)and subpostmasters
which is currently managed in the following way:
72.1 The Top 2000 branches , which are usually the largest branches
with the highest sales potential, are managed by an Area Sales
Manager (“ASM”). These branches receive face to face visits
from the ASM on a regular basis (at least monthly), primarily
to assist with improving business and sales performance, but
other non-sales issues are also addressed if required.
Whilst the ASM is trained to be a sales coach, they are not
considered by Post Office as “trainers” and would go to other
“expert domains” suchas the Field Support Team to obtain
assistance for subpostmasters with, for example, balancing
issues and using Horizon (see paragraph ®& below). The
subpostmasters of these branches are also invited to attend
Quarterly Business Up-dates where a range of topics are
discussed. Usually about 40-50 branches attend each session
and there are at least 2 events held in each of the 7 regions
(North East, North West, East Midlands, West Midlands, South
West and London, Wales and Scotland and Northern Ireland) each
year. If a branch has also converted to a MAINs contract’,
then the subpostmaster will also be invited to take part in
the “Breakthrough” programme. This involves intensive on-
site support post conversion by 3 ASMs. The purpose of this
training is to assist with the mind-sets and behaviours of the
subpostmaster and their team to ensure that the income of the
branch is retained and maximised.
The Next 2000 branches, which are selected either because they
have the sales potential or because the geographical location
is such that it is not cost effective to be managed by an ASM
as part of the Top 2000 branches (for example branches located
in remote parts of Scotland, Devon and Cornwall), are actively
account managed from a sales perspective by the Telephone
Account Management team. Face to face visits do not
routinely occur (unless there are, for example, specific
issues to address), but the Telephone Account Management team
make regular calls (usually every 2 weeks) to the branch to
monitor sales progress. The team can also refer branches to
be visited by a Regional Sales Trainer who can visit to coach
the subpostmaster and their staff on sales.
‘A MAINs contract is a type of contract that some branches where migrated to
as part of the Network Transformation Programme (further detail of the
Network Transformation Programme is available at paragraph @®).
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72.3 Remaining branches These branches are classed as “Branch
Support” branches. They are not visited pro-actively and do
not have a manager assigned to them. Their first point of
contact is NBSC where they can seek assistance with issues
such as balancing queries and resolving mistakes. If NBSC
cannot resolve the query, there are a number of escalation
points depending on the nature of the issue and, ultimately,
if it cannot be resolved over the telephone a visit by a Field
Support Advisor (see paragraph ## below) can be arranged.
73. Post Office has a dedicated Field Support Team which is responsible
for induction and on-going transactional training for all
subpostmasters. Currently the team consists of 227 Field Support
Advisors ("“FSA”)and 18 Field Team Leaders (“FTLs”). FSAs are multi-
skilled advisors who provide support to the network of branches.
This includes delivering training, subpostmaster queries and
auditing. FTLs are the FSAs line managers. The number of FSAs and
FTLs has doubled from 2010 when the team expanded to cope with the
Network Transformation Programme (the “NT Programme”). The NT
Programme is a programme to deliver £1.34billion of investment to
transform the branch network. It involves the migration of some
branches to convert to either MAINs or Local operating models (who
will receive significant investment from Post Office). The
remaining branches will remain on the current subpostmaster
contract.
74. The team is\ responsible for matters such as?
74.1 Delivering classroom training (a 5-8 day course) to all new
subpostmasters, who are going through the NT Programme.
This training takes place before a new subpostmaster starts
work in the branch and further detail is set out at paragraph
74.2 Training on site following a branch transfer. FSAs will
attend the branch for a number of days after the transfer and
will cover a range of topics so that the branch can operate
effectively. I This will be followed up with site visits,
telephone calls and an audit.
74.3 Requests from branches for remedial training from FSAs
throughout the year. This training is delivered as and when
requested on a wide range of topics such as ATMs, DVLA
transactions, balancing issues and unexplained losses. The
team received 863 requests for extra support in 2013.
Generally the subpostmaster will receive the training and the
subpostmaster is then responsible for training their own
staff. However, each request for training is considered on a
case by case basis and Post Office endeavours to provide the
best support necessary to address the issues raised by the
subpostmaster.
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74.4 Undertaking Compliance and Financial audits which also
includes providing further training to subpostmasters on
matters that arise out of any issues identified by the audit.
In 2013 there were over 3,000 compliance audits undertaken and
cash and stock checks were completed in 2,873 Post Office
branches.
75. The Field Support Team is not the only team within Post Office
which provide training and support, either on a face to face basis
or remotely via the telephone, for example:
75.1 Mails Development Managers were established in 2010 to visit
branches which receive high volumes of mail. They train
these branches on products and sales to increase business
growth in this area.
75.2 The Branch Standards Team was established in 2009 and is a
telephone-based intervention team. The teams contacts
branches regarding a wide range of performance issues.
Whilst the purpose of the call.is to/notify the branch of any
errors, they also ensure that the branch knows the correct
procedures to follow. If the branch requires further support
at any time, the team request a visit by an FSA via the Branch
Support Team [j
There are also a number of teams across Post Office who come into
contact with subpostmasters (such as product specific teams like
the national lottery team) and may feel that a visit or further
training would be beneficial for support. These teams can request
further visits and training for subpostmasters through the Branch
Support Team who will decide the most appropriate resource to
resolve the issue.
76. Post Office has gone through a number of structure reviews which
have influenced the support Post Office provides to subpostmasters
and their branches. These reviews have been driven by various
cost challenges and were often determined by Post Office’s funding
from the UK government for its network of subpostmasters as well as
commercial pressures, As a result, Post Office’s approach to
structuring its agency relationships with subpostmasters has
changed over the years, for example:
76.1 Up to 2005 - branches were either designated Urban or Rural.
Each Urban branch and the largest of the Rural branches was
assigned a Retail Line Manager (each Retail Line Manager would
manage around 40-60 branches). The smallest of the Rural
branches would be managed by a Performance Advisor (each
Performance Advisor managed approximately 100 branches) .
Both Retail Line Managers and Performance Advisors were
responsible for performance. The Post Office training team
which sat within Post Office’s HR department was responsible
for matters such as transactional training.
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76.2 2005-2006 - the network of subpostmasters was operated under a
structure of Diamond, Platinum and Gold. This structure was
known as a Sales and Service structure. Most branches
operated under the Diamond or Gold network. The structure
had a series of Sales Managers and also had Area Performance
Managers. Again, most branches had an allocated manager who
would visit and the training team were an extra resource to
use for matters such as transactional training.
76.3 2006 - 2008 - in 2006 there was a full review of Post Office's
structure. Sales Managers were replaced by either Commercial
or Community Business Development Managers (“BDM”). Each
branch had a BDM assigned to it. In the Commercial network,
the BDM would manage about 40 branches and in the Community
network about 100 branches. The Commercial Network
concentrated largely on sales and the Community network was
responsible for picking up non-sales issues. The Branch
Support Team was also established to assist with sales issues.
It was also at this point that the Training team were renamed
Network Field Support Advisors.
76.4 2008 - the financial audit team merged with the Network Field
Support Advisor team so Support Advisors would conduct both
training and audits in branches.
76.5 2009 - in around 2009 Post Office took the decision to remove
the BDM role and the Area Sales Manager structure was created
and, aS a result, if a smaller branch required a site visit it
would need to be requested from NBSC.
‘Auditing
7.
78.
79.
In order to monitor and validate performance Post Office will often
conduct audits of branches. This allows Post Office to assure and
verify)its assets which are held in branches and to ensure
compliance with regulatory and business requirements.
Audits can take place:
78.1 when a risk at a branch has been identified (eg. the branch is
continually suffering shortfalls);
78.2 on the transfer of the branch to a new subpostmaster (a
further audit will often take place 6-9 months after the date
of transfer); or
78.3 following a robbery or burglary.
As it is not possible for Post Office to visit and audit every
branch each year, it also undertakes random sampled audits whereby
branches are selected at random to be audited. Whilst this has the
benefit of validating the stock held within a branch and ensuring
Post Office’s systems and practices are being adhered to, it also
assists Post Office with risk profiling e.g if 5% of branches
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8
8
0.
randomly selected show a particular discrepancy it could be
projected that Post Office is exposed to that discrepancy across 5%
of its branches.
Whilst the precise nature of the audit will depend on the reason
for the audit (eg. if it is as a result of a robbery, audits are
carried out to verify the loss suffered, primarily an audit
consists of an inspection of the cash and stock held by the branch.
This may be followed by a Compliance Audit to ensure regulatory and
business requirements are met. Audits are undertaken on an
entirely objective basis and will include checks such as:
80.1 for branches with paystations or lottery terminals, ensuring
any overnight Transaction Acknowledgements (an automated way
to account for transactions carried out for clients such as
Camelot, see section [##R])have been properly accepted;
80.2 checking the cash declaration for the previous trading day;
80.3 counting and recording the cheques held in the branch against
the record maintained on Horizon;
80.4 verifying the currency held im branch; and
80.5 counting and recording the amount of stock held in branch
against the record maintained on Horizon.
. The results of the audit are discussed with the subpostmaster and,
in the event of financial irregularities, may result in the
subpostmaster being suspended or being asked to “make good” the
loss i.e. to pay the loss to Post Office from the subpostmaster’s
own funds. Alternatively, transaction corrections may be required
(see sectior ) and if compliance issues are identified
this may be followed up by the Branch Standards Team who will
identify and assist the subpostmaster in rectifying the compliance
issues. Tf amissue cannot be rectified by the Branch Standards
Team, the Team can arrange for a Field Advisor to visit the branch
and/or for further training.
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Possible reasons for balance discrepancies
82.
83.
In Post Office’s experience there are a variety of reasons why a
branch may encounter a discrepancy between the amount of cash and
stock on hand and the amount of cash and stock recorded on Horizon
- this situation is commonly referred to as a "balancing
discrepancy".
It should be noted that some of the situations below may cause a
gain for a subpostmaster or only cause a temporary loss. However,
this can cause real losses to be hidden:
83.1 If an error causes a surplus of cash in the branch, this may
off-set a smaller loss caused by another error. In that
scenario, the loss error may not be revealed, as the overall
branch accounts will balance or show a surplus; or
83.2 If the surplus error is later discovered and corrected via a
TC, then in a later version of the accounts there may be a
loss even though all transactions in that later period have
been conducted correctly.
Example:
A branch suffers two errors, one creating a £100 gain and another
causing a £100 loss. At the end of the trading period, the
branch's accounts will balance as the two errors effectively cancel
each other out for balancing purposes.
If inthe next trading period the surplus error (i.e. the gain of
£100) is discovered, a TC is sent to the branch which increases the
amount of cash recorded)in the branch accounts. If all the
remaining transactions throughout the rest of that trading are
conducted correctly the branch will still show a loss at the end of
the trading period due to the TC. Therefore, whilst the loss of the
branch shows in the current trading period, the error which caused
the loss occurred in the previous trading period.
Miss-key
a4.
A miss-key is the term used when staff enter the wrong value of a
transaction into compared to the actual amount of the transaction.
The difficulty with a mis-key error is that only the employee who
conducted the transaction will be able to prevent or
retrospectively identify this error.
Example:
A personal banking customer may wish to deposit £1000 into their
account and the person serving the customer mistakenly enters
£10,000 but only £1000 cash is taken from the customer. This would
create a shortage of £9,000 for the branch.
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In order to rectify this mistake, the Banking Team within the FSC
has to contact the associated client bank who in turn contacts its
customer. The customer will be asked to confirm the amount
deposited at the branch. However, the receipt printed from Horizon
and provided to the customer will show a deposit of £10,000 and,
therefore, the rectification process relies largely on the action
of the customer and their bank.
Unless it can be agreed with the bank to reverse the transaction,
there will be a real loss of £9,000 to Post Office as Post Office
will need to account for the full £10,000 as the customer's account
will have been credited with £10,000.
Mixing retail and Post Office business
85. Generally, a branch must keep physical separation between retail
and Post Office cash. Mixing these two sets of cash can lead to
Post Office cash being lost to the retail business as it can become
difficult to track the amount of cash that should be allocated to
the Post Office and retail sides.
Giving money out instead of accepting money
86. At the end of a customer transaction, payment needs to be made to
or received from the customer. Even if the transaction is
correctly recorded on Horizon, branch staff may take or hand out
the wrong amount of cash. This error could be as simple as
miscounting cash before handing it to the customer.
Example:
A business banking customer may present documentation to deposit
£1000 into their business banking account. If at the end of the
transaction £1000 in cash is given to the customer instead of
taking £1000 in cash from the customer there will be a shortage to
the branch of £2000, made up of the deposit entry £1000 being
correctly input onto Horizon (Horizon then expects to receive
£1000) and the settlement out to cash of a further £1000 which will
be deducted from the cash in branch.
Accidental loss
87. Losses may occur accidentally in branches. For example, money
dropped in bins with rubbish, money dropped or knocked into mail
bags, and money left on counter tops which is snatched by a
customer without branch knowledge.
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88. In the first two of these examples the honesty of the finder and
the ability to identify the money as coming from the branch is
required to return the money to the branch.
89, In the third example unless the person is caught in the act of
snatching the cash it is probable that the loss would only be
discovered at the end of day cash declaration or at the time of
completing the Branch Trading Statement. The branch staff may be
unaware of how the loss had occurred.
Cash Declarations
90. As described at KX, at the end of each day a cash declaration
should be made by subpostmaster. If the subpostmaster incorrectly
counts cash or does not follow the correct procedure when dealing
with cash remittance pouches, ‘the wrong amount may be declared
creating a discrepancy between Horizon and the amount of cash held
in branch.
Miscounting cash on hand
91. Cash must be physically counted at the end of each day and when
completing a Branch Trading Statement. When completing the
physical cash count, notes and coins can sometimes be miscounted or
missed altogether. When counting cash quickly a bag of coins or a
bundle of notes can also»be missed.
92. Another instance of where this can happen is where a Post Office
product is sold on the retail side of the business. Most Post
Office products must be sold from the Post Office counter in the
branch premises. However a few Post Office products, such as
lottery scratchcards, are permitted to be sold from the retail
business. However, it is the subpostmasters responsibility to make
sure that any cash taken from the sale of such products is
transferred from the retail businesss to the Post Office side, and
properly counted in any cash declaration.
93. Cash remittance pouches that have also been made up in preparation
for the Cash in Transit collection drivers may be erroneously
counted as part of the cash declaration. Horizon does not include
this amount within the cash holding figure and, therefore, the
branch would be declaring a gain in this instance.
Cash remittance errors
94, If there is mistake made between the amount that is remmed in or
out and what is received or sent by or to the Post office cash
centre, then this will lead to a branch discrepancy.
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Example:
If a branch has bagged up £25,000 to send to the cash centre but
enters £20,000 into the system then there will, in the short term,
be a shortage of £5,000. If the cash has left the branch then the
mistake cannot be rectified by the branch. The cash will be counted
at the cash centre and a Transaction Correction will be sent to the
branch to rectify the branch account.
95. If a branch has an ATM machine, then it will receive a separate
cash remittance for ATM. This is because the notes in the ATM
machine have to be prepared to a certain standard to meet
regulations and, therefore, cash used over the counter cannot be
transferred into the ATM without the prior consent of the Cash
Management Team.
Stock remittances
96. Branches receive their stock (postage, MVLs etc) from Post Office
either via Cash in Transit or Royal Mail Special Delivery. The
branch is responsible for checking that the amount of stock
received matches the advice note delivered with the order and
remming the stock onto the correct lines in Horizon.
97, Branches are required to return some value stock items back to
Swindon, This is usually connected to Special Stamps which should
be withdrawn from sale. The)branch has to rem out the stamps on
Horizon and return the amount via the same method as receipt.
Swindon will, therefore, receive and process large amounts of stock
and only check 10% of stock returned. Errors can therefore be made
in placing the wrong amount of stock into remittance pouches or
inputting the wrong value of the remittance on Horizon.
Cheque handling
98. Branches can accept cheques as payment for certain products and
services. Customers can cash personal cheques up to certain amount
or accept deposits for certain partner banks. There are set
procedures that must be followed in branch at the end of each day
to ensure that the cheques are handled correctly, the customer's
bank account is debited accordingly and Post Office can settle the
client accounts. Typically there are two scenarios where
subpostmasters do not follow the operational process which can
cause a loss:
98.1 A cheque has been accepted for a non-cheque acceptable product.
(i.e. foreign exchange sales). By accepting payment by cheque
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for a non-cheque acceptable product, it may not be possible to
link a missing cheque to a transaction record.
98.2 The method of payment has not been correctly recorded on
Horizon.
Example:
If a cheque is presented by a customer to pay for a
transaction, but the transaction is accidently settled as a
cash transaction, the value of cheques held in the branch
recorded by Horizon will not match the value of the actual
cheques held in the branch. At the end of each day a cheque
listing is printed from Horizon. This printout should be
checked against the cheques held in branch and if it does not
match, Horizon should be corrected before remitting out the
cheques to Post Office. After remming out the cheques, a
further cheque listing should then be printed to confirm that
no cheques are held in branch. If a branch has not ensured
that the cheques in branch match Horizon’s record before
remming out the cheques, then the cash in the branch will show
a shortfall and the amount that is received at the cheque
processing centre will not)match the amount that has been
entered onto Horizon. This is because Horizon calculates how
much cash should be in a branch based on the “cash” settlement
option that-is pressed at the end of each transaction.
Therefore, if the “cash” option has been pressed instead of the
“cheque” option, Horizon will expert there to be more cash in
the branch than is actually held. This may generate a
Transaction Correction to correct the account unless the branch
reverses the transactionand records it accurately as a cheque
transaction.
99. Branches must follow a process to ensure that the amount of cheques
recorded as held in branch balances to zero. This process is called
“cutting off”. If the cheques are not “cut off” at the end of the
day the cheque listing on the following end of day procedure will
not agree with the actual value of cheques held in branch. This is
corrected in exactly the same way by amending the “cheque on hand”
figure to show the correct value of the actual cheques held in
branch. The value of the cheques in branch is then sent out before
a further cheque listing to confirm a zero entry is printed.
100. It is Post Office policy that a branch will only bear the cost
of a lost cheque if the branch has not followed proper procedures.
If the root cause of a lost cheque is unknown or attributed to some
other cause outside of the branch, Post Office will absorb this
loss and not pass it on to the subpostmaster. In the vast majority
of cases, Post Office either mitigates the loss caused by a lost
cheque or absorbs the loss itself. Only a small number of missing
cheque cases result in TCs being issued.
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Connectivity
101. Each Horizon terminal requires a telecommunications signal in
order to record transactions to the central Post Office data
centres. Each branch uses the signal to communicate with a data
centre where all transaction data is sent, and this in turn
communicates with Post Office’s clients (such as banks, DVLA and
local authorities) to complete transactions. The router in each
branch which communicates with data centres/needs to be connected
to both a power supply and a communication channel to complete
customer transactions. Connectivity issues can arise for example
when there is an interruption in power supply or if a user is
already logged on to a terminal but attempts to log on to a second
terminal using the same log in details.
102. When serving a customer, transactions for certain products send
information directly to data centres during the transaction i.e.
moneygram, online banking, postal orders (known as recoverable
transactions), and some where no interaction with the data centres
happens until the customer transaction is completed on Horizon i.e.
mail transaction, automated bill payments) (known as non-recoverable
transactions) .
103. If there is an interruption to the power supply during a
customer transaction, for example, a power cut due to severe
weather, the Horizon user will be prompted, once the system is
reconnected and the user is logged back on, with a message
containing instructions on how to recover the interrupted
transaction. The message explains whether the customer's
transaction was completed and whether any payment needs to be
received or made. The steps which need to be taken (as directed by
Horizon) will depend on whether the transaction is recoverable or
non-recoverable.
104. Similarly, if there is an interruption to the communication
channel, for example, a telephone line cut and/or a failure to
connect to the mobile backup device during a customer transaction,
Horizon will prompt the user with an on-screen messages explaining
what to do to and whether to cancel or retry the transaction.
105. If the Horizon user does not follow the recovery instructions
correctly, this could result in a balancing error as well as having
a negative impact on the completion of the customer’s transaction.
106. Fujitsu proactively monitor the primary and back-up connectivity
between branches and data centres. If Fujitsu is alerted to a
connectivity issue it will investigate and resolve the issue. As a
result, Fujitsu will not wait for the branch to contact Post Office
to raise an issue about connectivity - as soon as an issue is
detected it will seek to resolve it.
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Transacting from the wrong stock unit
107. Horizon has the capability to create what Post Office call stock
units, which in effect are virtual tills. There are no mandatory
business requirements for how many stock units a branch has to have
or how they work. Basically, the cash and stock for a branch can
be divided into a number of stock units for members of staff to
serve customers from. Some branches operate on “individual” stock
units. This means that cash and stock is transferred from the main
branch stock to the individual stock unit. The person allocated to
this stock unit normally has a separate draw in which to store cash
and stock and they are responsible for balancing that particular
stock unit. When branches have balancing problems, it is normally
recommended to adopt this approach so miss-balances can be
identified to specific individuals. Some branches operate “shared”
stock units. In effect, this means that all the branch staff serve
from one pool of cash and stock.
108. When a member of staff within a branch is serving a customer
they log onto Horizon with their own user ID and password and tag
themselves to a stock unit containing cash and stock (either their
own individual stock unit or a shared stock unit). If a user
accidentally tags themselves to the wrong stock unit and serves a
customer or transfers cash or stock, then the accounts will record
the transactions against one stock unit but the physical cash and
stock will move in/out of a draw allocated to a different stock
unit.
109. This9can be corrected by either reversing the transactions and
putting them through the correct stock unit, or calculating the
cash value of the transactions and transferring the money to the
correct stock unit.
110. In theory, there should be) no net overall discrepancy to the
branch as any losses in one stock unit will be compensated by the
gains in the other stock unit. However, taken in isolation this
can appear like an error has occurred in one of the stock units.
Outstanding transfers between stock units
111. Where a branch has more than one stock unit in use (please see
paragraph XX for an explanation as to stock units) there may be
times when cash and/or stock are transferred from one stock to
another.
112. For example if stock unit AA is running short of cash, stock
unit BB may transfer money to allow customer service to continue
smoothly. The user in stock unit BB should choose the transfer out
option in Horizon and choose the correct stock unit (in this case
stock unit AA) and transfer the cash out. A receipt is printed
which is kept in stock unit BB to confirm this. The user in stock
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unit AA then needs to accept the cash on Horizon and print their
own receipt to confirm this. At this time a Branch Trading
Statement or (at any other time) a report called “Transfer
Reconciliation” can be printed from Horizon to confirm that there
are no outstanding transfers pending and that all totals are equal
to zero. (Commented [AP68]: How does this eo wrong? i)
113. Issues can arise when a subpostmaster tries to hide a loss. For
example, if a loss of £2,000 is suffered and the subpostmaster does
not want to show this on the accounts he may transfer the loss
between stock units. A Branch Trading Statement should identify if
this has occurred. However, a subpostmaster can still attempt to
hide the loss by for example transferring the loss into a fictional
cash pouch and then remming the fictional cash pouch back into a
stock unit on Horizon once a Branch Trading Statement has been
obtained. [Therefore, only an audit would identify a loss in this
scenario - ]
Transaction Acknowledgements
114. Some Post Office transactions eg.
Camelot (Lottery) /Paystation™/Post § Go are not transacted through a
Horizon terminal but instead via separate machine. However, the
cash taken for these transactions needs to be accounted for on
Horizon as part of the overall branch balance.
115. Transaction Acknowledgements (TAs) were introduced to automate
the process of reconciling the data being sent directly from the
separate machines and the amount of cash that should be processed
through Horizon. The transactions for Camelot, paystation and Post
and Go are processed overnight and the “Transaction
Acknowledgement” is sent to the branch the following morning
confirming all transactions that took place the previous day. For
example, lottery tickets (not scratchcards) are sold to customers
via the lottery terminal. The data from these sales goes straight
to Camelot and the branch takes payment for the ticket and puts the
cash into a separate drawer on the lottery terminal. The following
day, the branch will be sent an electronic TA which will appear as
a message for the first person who logs onto Horizon. The TA
identifies the total amount of sales transacted through the lottery
terminal for the previous day and informs the person how much cash
should be transferred from the lottery till drawer to the Horizon
terminal drawer.
116. Prior to TAs being launched the subpostmaster would have to
obtain the relevant print outs from each machine (i.e. the lottery
terminal) and then input these figures onto Horizon and reconcile
any cash owed. The launch of TAs removed the need for the
subpostmaster to manually input figures onto Horizon.
Historically, errors could occur in manually reconciling these
transactions.
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117. Even with the TA process, errors can occur if the cash from the
lottery terminal is not transferred to Post Office or if the user
accidentally pays the cash amount into the wrong stock unit.
Alternatively, if the subpostmaster accepts the TA but does not pay
in the relevant cash then there will be a shortage.
DVLA Motor Vehicle Licences
118. Failure to follow the correct process for accounting for MVL
discs (commonly referred to as tax discs) can lead to miss-balances
in branch. Branches will receive MVL discs from Post Office which
they have to rem into their stock using Horizon.
119. When the discs have passed the time where they can be put onto a
car, the branch is responsible for destroying the discs and
following a process to inform Post Office that they have been
destroyed. When destroying the discs, if the branch does)not follow
all of the steps of “spoiling the disc” and remitting it out to
Post Office, Horizon will still record the disc as being in the
branch, even though the disc has been destroyed. when the branch
comes to balance and a full count of the discs is undertaken as
part of the stock balance, the number of discs in branch will not
match the amount recorded by Horizon. Whilst this does not create a
cash shortage, branches are held liable for "missing" discs at a
charge of £41.50 per disc because Post Office is liable to the DVLA
for the "lost" disc.
120. Failure to follow the reversal procedure for a MVL disc may also
lead to a branch discrepancy. For example, a customer asks to buy
a car tax disc and the transaction is completed on Horizon, but no
payment is actually taken, the branch has to reverse the
transaction and the disc. There are a number of steps that the
branch needs to follow. The branch has to reverse both the disc and
the payment. If they only reverse the disc out of the system then
the stock of discs will balance, but the branch will miss-balance
in terms of the cash.
Theft from Post Office
121. Theft by branch staff has and can occur. It may involve staff
taking directly from safes or drawers where the branch has not put
sufficient controls in place. These shortages would be identified
when a physical cash count and declaration is made, but it is not
possible for Post Office to remotely identify when the theft
occurred. Some thefts may also be accompanied by an effort to
disguise the theft eg. creating false transactions or gains.
Examples:
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Cash or stock may be falsely declared to give the impression that
the cash or stock is in the branch when in fact it has been stolen.
“Phantom” cash remittance pouches could be created to mask an
amount of cash that is missing but the pouch is reversed before the
dispatch, returning more value stock than is actually received
(creating a negative stock figure. For example, Horizon does not
take into account the amount of cash in pouches when it calculates
the amount of cash that it is expecting to be declared. So, if £10k
is missing, before the cash declaration is made, the branch could
make up a cash remittance pouch to cover the discrepancy of what
isn’t there, so in effect the branch will not show a discrepancy on
Horizon. Once the cash is declared, the branch will reverse the
remittance pouch from the system.
An overall branch balance is obtained by combining the cash and
stock value figures. If the branch has created a)negative stock
figure, it will potentially mask a loss on the balance, for
example, recording more cheques as being dispatched than are
cleared.
122. It is possible to identify the user ID that was used to
undertake these transactions but it is difficult to prove exactly
when the actual theft occurred.
Theft from customers
123. Theft from customers can also occur. Although this may not
necessarily result in a branch miss-balance, If the customer
complains»to Post Office, Post Office may compensate or reimburse
the customer and, therefore, Post Office incurs a loss.
Example:
A member of staff targets a vulnerable Post Office Card account
customer and confuses the customer to the extent that the staff
undertake the transaction twice but convince the customer it has
only happened once.
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Schedule 1: List of Products
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Schedule 2: Glossary of Post Office terms
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