Little is known about the practical, internal Inspection process carried out in those early Bank days described in J P Hilton's book
Britain's First Municipal Savings Bank. That there were processes, however, is undoubted, as Mr Hilton himself had gained general
experience with systems operated by the Yorkshire Penny Bank and had used this experience immediately he was appointed manager of
the temporary Municipal Bank in 1916.
By the Parliamentary Act of 1919 the Bank became a permanent organisation and with that legislation
came full provision for external audit
and inspection of the Bank's accounts, but until the names of all the then branch managers
and three inspectors were published in the Bank's Annual Report of 1928, the fact that there was a previous long-standing existence
of additional internal
inspectors must be safely and credibly assumed. Cash deposits and withdrawals had become the norm since the
decision in 1919 to discontinue the 'savings by coupon' scheme that had sufficed for the war years. Certainly cash control methods
and systems were rigidly enforced, as there was evidence in the old files of a manager who temporarily retained - he claimed for good
reasons - a sum of 6d (2.5 pence in decimal currency) before properly crediting the depositor's account. He promptly lost his managerial
post. Sadly, these historical files probably no longer exist, since in 1984 the new Trustee Savings Bank management assumed full responsibility
for archived records and are believed to have disposed of many.
The names of the disclosed three inspectors of the year 1928 were:
S E Bennett, J E Chapman, and E Cheatle (see Senior Management
). Certainly twenty years later, in 1948, 'Sid' Bennett (as he was known)
was still an inspector in the southern area of the city, including Selly Park, at which branch there were just two staff - the manager
(Horace Williams) and myself. It was here that I had my first 'victory'. Mr Bennett decided that I had accepted a forged receipt from
a child of eight years old who had encashed her school coupon card through the account. Both she and her mother were summoned to the
branch. The signature was genuine.
The scope of these internal inspections was formulaic and in principle branches knew fairly well
where the inspectors would look for error or malfeasance. The inspectors, who reported to the Superintendent of Branches, had no firm
base except that of the Bank's Head Office and often journeyed to branches direct and unannounced from their own homes, so there was
an inherent element of surprise. They were all men of long experience, so that it was unwise for staff to believe that any inspector
was unobservant and a branch inspection was always a time of anxiety, even though it rarely took more than two days to complete. Slightly
alarmingly, at least so far as efficiency was concerned, the inspectors operated singly and in designated areas, and also tended to
visit branches at prescribed intervals, so that it became possible for staff to anticipate their methods, although in the fullness
of time, this pattern would change from a 'box-ticking' process to something more imaginative. In its form at this simpler period,
the inspection would invariably consist of a count of some of the cash held in cashiers' boxes and in the 'reserve' holding in the
strongroom; (One manager - who died many years ago - kept his private collection of old siver coins in the strongroom in this reserve
and although staff were strictly instructed not to issue the coins mistakenly to customers, the unusual collection became an embarrasment
at an inspection. It was therefore hastily 're-purchased' as soon as any inspector crossed the threshold.); a batch of withdrawal
forms would be checked for veracity of signatures; serial numbers of 'continuation' ledger sheets/cards and passbook issues checked
for accuracy; the balances of one or even more ledgers might be laboriously 'extracted' by adding-machine operated by the inspector
in person in order to prove the actual balance against the theoretical; the accuracy of debit loan-interest calculations in the house
purchase ledger was invariably checked; the legality of claims for deceased customers' accounts was investigated; and (if time permitted)
the passbooks of customers who were visiting the branch in person on the day were compared with their specific ledger record. In fact,
customers were usually most impressed with this latter action, since the passbook was duly rubber-stamped
with the inspector's initialised
stamp - which, of course, for security reasons never left his possession!
Inevitably, there were time-wasting checks. It was a requirement
of the Annual Report that it should contain statistics detailing the number of Home Safes
on issue; the amounts banked therefrom;
and other statistical factors concerning them; and because these figures were to be made public they were all subject to inspection.
At least one clerk was dismissed for falsifying a minor aspect of the Home Safe statistics
, such was the gravity attached to the inspectors'
findings. Many years later, I realised that there were much more important Home Safe issues to face. It was quite simple for a cashier
to steal from the customer
, not the Bank, by the simple process of deliberately miscounting the contents of the safe! There could
be as much as £40 or more in tightly rolled notes and unless the customer was extremely observant, it was feasible to quote an incorrect
figure, which the customer was then required to write on the deposit slip - a supreme irony, as the customer was thus validating and
'approving' his/her own loss. Indeed, one cashier was was later observed practising this deceit and was trapped by a 'planted' safe
containing a known amount, which the cashier intentionally miscounted. The miscreant was, of course, dismissed. Again, in due course,
the need for these statistics was deemed an unnecessary burden and they were discontinued. Indeed, it would not be long before the
whole concept of the Bank's Home Safe was regarded as old-fashioned and the safes were withdrawn from service, valuable though they
had been to the earlier image of the Bank.
For many years, in fact until the early 1970s, the pattern of inspection remained largely
unchanged, except to take account of increased volumes of work, but soon needed quickly to include completely new and different features
of the Bank's service, therefore requiring an understanding of unquantifiable risks that went alongside these innovations. Current
(cheque) accounts had been introduced in July 1967 and were already proving very different from the simple deposit/withdrawal structure
of the traditional savings account and in addition to Bank house mortgages already initiated in 1919, personal loans were introduced
in 1971 and were offered to customers through the medium of a company specialising in such a product, United Dominions Trust Ltd.
Both raised an entirely new threat to the security of funds administered by the Bank and needed contemporary, current controls and
inspection, rather than retrospective checking of paper records. Whereas inspectors had always been available to investigate alleged
forgery; or large differences (particularly shortages) of cash under a cashier's control; or disputes over ownership of an account,
etc; it was now necessary to follow up current account misuse or failure to repay sums under a loan agreement, both difficult to interpret
in terms of potential cash loss, since some may be due to carelessness or ignorance on the part of the customer and thus hopefully
recoverable, whilst others may be due to pure fraud thus needing recourse to legal action for recovery. Whereas departmental managers
and staff were able to initiate such action, at some stage the inspectors needed to keep a watchful eye on the possible outcome. There
was also a new, potential risk of staff themselves manipulating loans or the Bank's own cheques to their own ends by using these loan
instruments or cheques to borrow money to which they were not (under their terms of employment) entitled without Head Office permission.
A large element of investigative skill - even guesswork - was now needed in an inspector's armoury. A case occurred where a manager
not only raised loans in fictitious names for his own benefit, but acted as a 'Robin Hood' character by lending to people who had
no hope of repaying. Sadly, when the police became involved, they preferred to make a case only for the theft of limited sums, which
they said were easy to prove, rather than prosecute those more difficult occasions when forgery and fraud were clearly evident. In
this instance, much of the inspection process had not borne fruit.
Perhaps the most dramatic change for inspection processes was yet
to come however, for over a three-year period commencing in 1973, the entire records of the Bank's accounts, customer and administrative,
which since the Bank's inception had gradually been transformed wholly to an 'on-line-real-time' computer system. This change meant
that the accounts were now held on a computer based in Kidderminster, Worcestershire, which was shared with those Trustee Savings
Banks in regions close to Birmingham. As error, or even fraud, could now be committed outside the control of the Bank itself, it was
decreed that the Chief Inspector would become a representative on a committee with inspectors from the various neighbouring banks.
In addition, the Bank's branches would need to be conversant with computerisation principles, which although obeying general accounting
principles, used wholly different methods of achieving the same result. As new inspectors were appointed, most had branch experience
of computers or attended courses to acquire basic knowledge.
All these changes and the attendant revision of techniques came about
so rapidly that it became obvious that the inspectors could no longer operate singly, nor could they continue to work purely on the
basis of a checklist of standard items, so it was decided to appoint assistants chosen from lower-grade staff, but chosen for their
observed ability to analyse and to show initiative when it came to interpreting suspicious or contentious material. Moreover, the
inspectors and their assistants would work as a pair and would have much more autonomy when it came to deciding what they should inspect,
which in practice meant that at least one pair would be assigned to inspecting the various departments of Head Office (House Purchase
Department, Accounts Department etc), something that had never been envisaged before and hitherto had been strictly the domains of
the appointed external auditors. The internal inspections were now no longer mere guardians of the Bank's branch/customer account
assets, but were also considered competent to make observations upon the more obscure aims and methods of departments. Such comments
did not always meet department approval, but at least served to stimulate debate and sometimes to promote change.
By this time the
Inspection Department consisted of the Assistant Branch Superintendent/Chief Inspector, four Inspectors and four Inspector's Assistants,
all under the ultimate control of the Superintendent of Branches. It would not be for long. Very soon it would be 'all change', heralding
the Bank's amalgamation with the TSB movement and a new hierarchy.
The above article was contributed by Norman Worwood,
a long-term employee of the Bank who held a number of managerial appointments at branch and administrative levels, including Superintendent
of Branches. He retired in 1984, at which time he was Assistant General Manager - Operations with TSB of Birmingham & The Midlands.