POL00029128
POL00029128
Mos
Howell Hylton ose _ BY.
From: martin smith <_
Sen 25 July 2013 16:
To: ‘howellhyltoni
Ce: martin smith
Subject: Susan Knight
Attachments: SKMBT_42313072515380, pdf
Dear Sirs,
Please see letter attached hereto.
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Date: 25th July 2013 DX 10826 Leicester
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Email: simon. clarke enna’
Seoure Emall:siton.clarkey GRO.
Dear Sirs,
Fax:
Re; Susan Knight
Truro Crown Court ~ 26th July 2013
On the 8 July 2013 a report into the operations of the Horizon system was published by
an independent organisation which had been commissioned by our clients, Post Office
Ltd, The report is known as the Second Sight Interim report. We have also recelved and
considered a second report, concerning an investigation into an incident at another post
office, the Helen Rose Report,
We have thorougly reviewed the case in the light of material contained within the Second
Sight Interim report and the Helen Rose report. We have also considered our disclosure
duties under the CPIA 1996 and the Code of Practice enacted thereunder, and the A-G’s
Guidelines on Disclosure. We tow disclose these reports to you in accourdance with these
duties.
We would algo remind you of your duty not to disclose this material to any third party
other than your client; in particular the Helen Rose report is not in the public domain.
Yours faithful:
Barrister
_ Direct Di
SE ES IS ROLE TL ERTIES LIER ITS EL TE IE NIST SE TS PERT I 5
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Interim Report into alleged problems with the Horizon system
1, Introduction and Scope
1,1, Following discussions with Post Office Limited ('POL') Senior Management in June and July 2012,
with the Rt Hon James Arbuthnot MP and with Alan Bates and Kay Lirinell representing the Justice
Ky
appointed to carry out a review Into alleged problems with POL's 'Horlzon'' System.
1.2, The remilt.of the Investigation/Inquiry was. later-defined as:
"to consider ahd to advise on.whether there are any systemic Issues and/or concerns with the
"Horizon". system, including training and support processes, giving evidence and reasons for
the conclusions reached",
1.3, It was also agreed that Second Sight's report would:
“report on the remit and. if necessary will contain recommendations and/or alternative
recommendations to Post Office Limited relating to the Issues and concerns Investigated
during the Inquiry. The report and recommendations are to be the expert and reasoned
opinion of Second Sight in the light of the-evidence seen during the Inquiry."
1.4, It became necessaryto ensure that references to “the Horizon System were understood.and agreed
by all stakeholders, Was Second Sight to look only for defects in the software code of Harlzon? Or,
was ittotake a broader view and also examine:
a) the surrounding Operational Processes, both at branch level and in POL's central processing
centres;
b) the interfaces between the Horizon system and other-systems that are the responsibility of
organisations other than POL such as Camelot, the Bank of Ireland, the Co-Op, various
Energy Companies and the ‘LINK’ system for processing Credit and Debit Card payments and
withdrawals;
¢) the power supply and telecommunications equipment that connects every Horizon terminal
to POL's centralised data centres;
d) the training avallable to Sub-Postmasters (‘SPMRs') and their staff and whether It was
commensurate-with the demands of the day-to-day Job.at the counte;
the-actions need to ‘balance’ at the ed of each Trading Period ('TP’) and the Investigation
work needed in dealing with errors and Transaction Corrections (‘TCs');
e)
f
the level of support available to SPMIRs and their staff from POL's Helpdesk;
the effectiveness of POL's audit and investigative processes, both Ih assisting SPIMIRs who
called for help in determining the underlying root cause of shortfalls and in providing
evidence for other action by POL such-as-in Civil and Criminal Proceedings.
8
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Interim Report into alleged problems with the Horizon system I
1,5. In answering the question as to whether Second Sight was to only examine the narrowly-defined I
Horlzon software, or the far more broadly-deflned Horizon system, POL's own definition of ‘Horlzon’ I
provided much of the answer, \
I
er hn Be lt May, 2001, ROL's Information Manager defined "Horizon" as follows: I
1
I
can advise that the name Horlzon relates to-the entire application,. This encompasses the
software, both bespoke and softwaré™ packages,” the” computer hardware and
6 ai a
software used to coritrol and monitor the systems. In addition, I can advise you that testing
and training systems are also referred to as Horizon".
1,7. This POL definition does not include ‘audit and investigative processes’, but it quickly became clear
that POL's audit and investigation methods have had a profound Impact on the SPMIRs Involved In i
almostall of the cases we have examined, .
1,8. Second Sight's Investigation has consequently addressed matters well beyond the narrow definition
of the core software component-of Horizon In order to-ensure that we have adequately dealt-with
the totality of the concerns'ralsed by SPMRs.
1.9. Before describing the approach adopted in this Investigation, it is necessary to put the scale of the t
Investigation In context,
1.10, Second Sight has been asked to Investigate AT cases submitted to either the JFSA.or to the office of
the Rt Hon James Arbuthnot MP. All of these submissions are highly critical of POL's Horizon system
and in many cases, the way that POL has dealt with the matters reported.
1.11. The Horizon system Involves approximately 68,000 users and processes over 6 million transactions I
every day. The entire population of over 11,800 branches was notified about the proposed I
investigation ‘by Second Sight and this resulted fn: 14 additional cases being accepted for
Investigation, Whilst Inno way minimizing the potential Importance of the cases under review, this
level of response suggests that the vast majority of SPMRs and branches are at least reasonably
happy with the Horizon system. I
2. Approach adopted
2.1, Second Sight has examined cases subinitted from two sources, ‘The first. sélection of cases were
those submitted by SPMRs, with the endorsement of their constituency MP, through the office of
the Rt Hon James Arbuthnot MP, ‘There were 29 such cases.
2,2, The second source of cases was through the JFSA, These cases were submitted In accordance with
an Agreement dated December 2012 between POL, Second Sight.and the JFSA (se Appendix 5),
That Agreement seta cut-off date of 28th February 2013 for the submission of suitable cases to the
JFSA, or directly to Second Sight.
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Interim Report into alleged problems with the Horizon system
2.3, In the event, over 60-SPMRs contacted the JFSA and 18 cases were considered to be suitable for
submission to Secorid Sight. These 18 JFSA-sourced cases were generally simpler, more recent and
better documented than the cases submitted via MPs.
The initial plan was to Interview each SPMR after all the
examined. This has proved to be much more difficult than was expected. Delays in producing case
documentation,to Second Sight have added materially to the cost of the investigation and to the
“==sime taken to complete tt. ‘The mali problent here seeine to be that POL does hor Malvern
central tile foreach case. Rather, documents had to be gathered from multiple-internal sources,
2.5. Where MP sponsored cases have been subject tovelther Civil Recovery of Criminal Prosecution; ROL's
centralised: Legal Department was able to supply many documents, However, we found that a
significant number of cases had hot progressed this far and that documentation was ‘held {n many
locations within POL, Including the National Business Support Centre (‘the NBSC’), the Helpdesk, the
Branch Support Team, the Security Team, the Former Agent Accounting Department, and Legal
Services,
2.6, In several instances, POL's sever-yéar Document Retention Policy has meant. that lite or no
documentation was available for Second Sight to-examine. The same retention policy applies to the
underlying Horizon computer data, In a number of cases we were provided with POL created
documents by SPMRs, where POL had been unable to supply the same document, even though. tt
was within the 7 year retention period.
2.7, After examining all of the available documents and In some cases the Horizon computer-data relating
to each case, Second Sight: has been making cantact with each SPMR In order to obtain, through
telephone calls and face-to-face interviews, the SPMR’s version of events. Second Sight then
summarised: the SPMR's assertions Into-one or more ‘Spot Reviews’, To date; 29 Spot: Reviews have
been created by Second Sight and other Spot Reviews are planned, Ten Spot Reviews have been
sent to POL and a formal response received, Nineteen, Spot Reviews are currently ‘work'in progress’.
3, The concept of a “Spot Review’
3,1. It becarne clear at an early-stage Inthe investigatlon that It would riot be efficient or cost effective
for Second Sight to examine all of the Issues ralsed by SPIMRs or covered in POL’s Case Files,
3.2. Accordingly, and with the consent and approval of both the JFSA and individual SPMRs, Second Sight
conducted a fast track’ review of the available information In each case and Identified the key Issues
that were relevant to the remit of the Investigation, Each key issue was then dealt with as a Spot
Review, A case with multiple issues would give rise to multiple Spot Reviews, eact of which would
be dealt with on an individual basis.
3.3. It was agreed by POL, Second Sight, the JFSA arid the-Rt Hon James Arbuthnot MP that any report
Issued by Second Sight would maintain anonymity with regard to the Identity of individual SPMR
cases, Accordingly; this Report does not reveal the Identity of any of the cases being considered. In
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3.4,
all Instances where POL was asked to respond to specific issues, the SPMR's Identity was revéaled to
POL, but only after the SPMR's permission had been obtained.
This approach to Spot Reviews was intended to be a self-contained, easy to understand procedure,
free from unexplained acronyms and backed up by SPMR supplied evidential material, Each Spot
Review was then submitted to POL for a formal response, The POL response was then discussed
with both the SPMR and. the JESA.and,an.attempt made-to, reach agreement. and closure between
POL and the SPMR, as to the Issues. déalt with in-each Spot Review.
3.5,
3.6,
3.7.
Regrettably, no such agreement and closure has been achieved to date, In the face of assertions, by:
both the SPMR and by POL, supported In many cases by only partial or conflicting evidence, Second
Sight has attempted to find out what really happened. In most of the Spot Reviews investigated, we
have been able to find additional information that has been of assistarice in understanding what
actually happened,
This Interim Report covers 4 Spot Reviews where we have been able to reach a preliminary
conclusion or at least make substanitlal progress on the matters being reviewed.
As Spot Reviews were prepared, discussed and responded to:by POL, Second Sight was-able'to see a
number of ‘thematic Issues’ that were of concern to many of the SPMRs we have had contact with,
These frequently reported issues, some of which are described in Section 7 of this Interim Raport;
will be addressed In more detail in the Final Report;
4, Involvement of the JFSA:
4A,
At the request of the MPs represeriting their SPMR constituents and with agreement from POL,
Second Sight has worked closely with Mr Alan Bates of the JFSA and with the JFSA's appointed
Forensic Accountant Kay Linnell, This developed Into a sound working relationship and Second Sight
wishes to put on record its thanks to both Mr Bates and Ms Linnell for their help and professional
conduct throughout the Investigation,
5, Spot Reviews and Responses from POL:
5.1,
5.2.
53,
This Interim Report deals with just 4 of the 29 Spot Reviews so far prepared by Second Sight, These 4
Spot Reviews deal with events that are typical.of the matters reported to. Second Sight. by many of
the SPMIRs we have had contact with, They also:relate to matters that appeared, both at the time
they were Issued to POL and when the selection was. made for inclusion in this. Interim Report, to be
particularly relevant to the remit of the Investigation,
Second Sight has asked POL to deliver Spot Review responses that would prove as easy to
understand as the Spot Reviews themselvesy.that addressed the spirit, as well as the letter, of the
SPMRs' complaints; and that were backed up by evidence.
Whilst the Spot Review responses received from POL can be seen to be thorough, they are long and.
highly technical documents. In some cases, they present counter-assertions, based on Standard
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Operating Procedures and Controls, rather than tangible evidence of what actually. happened,
Accordingly, It has been necessary to summaris¢-arid simplify thé responses.recelved.
5.4, Our experience. over many years, shows that even apparently robust controls sometimes. fail to
a determined and skilful person. Second Sight Is therefore seeking
ere ‘evidence In support of POL's responses to some 0
dealt with inthis Interim.Report.
it fs only fair to say that POL-now finds tect in the same situation that has faced als of the SPMRs
who have submitted cases, They too, were unable to prove that the shortages or transactions that
they reported to POL, and In respect of which thay sought POL's help, were not the result of thelr
own (or their employees’) errors or criminal activity. In every case we have'looked at, only limited
assistance has.been provided to SPMRs by POL,
5.6. Ih the 4 Spot Reviews covered by this report, POL has only acknowledged: minor fallings in the
io implementation of its procedures and processes, or In other relevant areas, ‘It has agreed in
principle to. a number of process Improvelnents: relating to the matters under Investigation by
Second Sight, and some of these ‘have’been Implemented already,
5.7, Many of the SPMIRs’we have dealt with remain aggrieved and dissatisfied. with what they see as
POL's defensive and unsympathetic response. Whereas we had expected that some form of closure
would be reached between POL arid the SPMR associated with each Spot Review, this has so far not
been achieved.
6. Did defects in Horizon cause some of the losses for which SPMRs or thelr staff
were blamed?
6.1, There-Is still much work to be done on the cas¢s Second Sight hasbeen asked to Investigate, We {
have concluded in one of the four Spot Reviews covered. by this Interim Report (Spot Review SRO) I
that,-although the Horizon system. operated as designed, the lack of timely, accurate and complete.
Information presented to the SPMR was. a significant factor in his falling to follow the correct
procedure.
6.2. In that Incident, shortcomings In the branch's primary ard fall-back telecommunications equipment
exposed a weakness that led to a poor counter-level experience both for the SPMR and his I
customer. : I
6.3, We also note, In Spot Review SR22, that POL madeé-a charige to.its standard operating procedures for
Scratch Cards, just a few days after the SPMR was suspended. It is possible, that if thls change had
been Implemented earller, many of the problems would not have occurred. {
6.4. In the course of our extensive discussions with POL over the last 12 months, POL has disclosed to
Second Sight that,.in 2044 and 2012, it had discovered "defects" in Horlzon online that had Impacted
76 branches,
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Interim Report into alleged problems with the Horizon system
6.5. The first defect, referred to as the “Receipts and Payments Mismatch Problem", impacted 62
branches, It was discovered in September 2010 as a result of Fujitsu's monitoring of.system events
{although there were subsequent calls from branches), The aggregate of the discrepancies arlsing
from this system-defect was £9,029, the largest shortfall being £777 and the largest surplus £7,044.
howages.were.addresser/. ah noJNSS.tO.ANNV.SPM Rasa
6,6. The secorid defect, referred to as the "Local Suspense Account Problem", affected 14 branches, and
generated discrepancies totalling £4,486, Including a temporary shortfall of £9,800 at one branch
and a surplus of £3,200 at another (the remaining 12 branches were'all Impacted by amounts Ore:
than £161).
6.7, POL was naware of this second defect until,.a year after its first occurrence in 2041, It re-occurred
and an-unexplained shortfall was reported by an SPMR.
6.8. POL's Initial Investigations in 2012 failed to reveal the system defect and, because the cause could
not be identified, the amount was written off. Fujitsu looked into the matter early In 2013 and
5 discovered, and then corrected, the defect.
6.9. Itseems however, that-the shortfalls (and surpluses) that occurred at the first occurrence {in 2044)
resulted In’branches being asked to make good Incorrect amounts.
6.10, POL has Informed us that it has’ disclosed, in Witness Statements. to English Courts, information
about one other subsequently-corrected defect or “bug” in the Horizon software,
7. Frequently reported issues
7.1, It has become clear that whereas the Horizon. system. appears to achieve Its Intended purpose
almost.all of the time and operates:smoothly for most: SPMRs and thelt staff; some combinations-of
events.can trigger situations where problems occur.
7.2, The following Issues have been reported to us by multiple SPMRs as being of particular concern
about the Horizon system:
a) A-multkproduct system that Is far rrore complex and demanding than, for example, that
? found in.a-typical high street bank;
b) Multiple transactional Interfaces (‘hand-offs') to systems outsida of Horizon such as Lottery
Scratch Card and Bank of Ireland ATMs that. cause repeated and possibly large shortfalls
that take undue amounts of time to Investigate and resolve;.
¢) Unreliable hardware leading to printer failures, screen misalignment (pressing one Icon
sometimes results In the system selecting an Incorrect Icon) and failed communications
links;
d) The complexity of end of Trading Period ("TP') processes and the lack of a ‘suspense account?
option which would allow disputed transactions to be dealt with in a neutral manner;
e) Inexperienced trainers and. gaps In training coverage;
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Interim Report into alleged problems with the Horizon system
f) The lack of some form of on-site Supervision and Quality Control similar to that made
available to staff employed in POL’s Crown Offices;
8) The recelpt of centrally Input, overnight ‘corrections’ and other changes allegedly not input
h) Inadequate Helpdesk support, with responses that are ‘script-based’ and sometirnes cause
further or greater problems; .
i) POL investigation and audit teams that have an asset-recovery Or prosecution blas and fall to “tT
seek the root cause of reported problems;
}) A contract between SPMRs and POL that transfers almost all of the commercial risk to the
SPMRs, but with decreasing support being provided. In Its risk reward decision making, POL
benefits from any savings, while SPMRs may suffer increased risk,
7.3. We have read all of the examples of problems reported'to us by the SPMRs we have contacted, We
fo can’t help concluding that had POL Investigated more of the "mysterious shortages” and problems
reported to it, with the thoroughness that it has Investigated those reported to it by Second Sight,
POL would have been In.a much better. position-to resolve the matters ralsed, and would also have
benefited from process. Improvements.
7.4, \t may be that a significant limitation Inthe way that POL. responds to. matters. reported to: It are the i
terms of reference for the POL Investigations Division. The standard contract between POL and I
SPMRs states: I
"The Investigation Division does. NOT enquire into matters where crime is not suspected.”
7.5, This appears to suggest that’POL does not provide any invastigation support'to SPMRs, except where
criminality Is.suspected. The cases we have examined: show that POL does sometimes provide
limited Investigative. support to SPMRs reporting problems, but clearly, POWs ability to do this Is
constrained,
7,6, It is also unfortunate, in our view, that when POL does Investigate cases, there. Is often a focus on
(> ‘asset racovery solutions’ without first establishing the underlying root cause of the problem, This is
also an:example of a missed-opportunity tobe In-a much better position to resolve problems and to
benefit from process improvements.
7:7, Another issue raised, by some of the SPMRé that We have had-contact with, is the allegation thatthe
only time they were provided a copy of the full contract between POL-and SPMRs, was when POL
commenced litigation or recovery actions, This Is contrary to POL’s policy ‘and procedures and
enquiries are underway to'find out what has happened In the cases. where this allegation has been
made,
7.8. The 4 Spot Reviews.where we have beer able to reach preliminary conclusions, or at least make
substantial ‘progress in Investigating the matters ralsed, are attached at Appendices
1to4,
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Interim Report into alleged problems with the Horizon system
8, Preliminary Conclusions
8.1, This is an Interim Report and there ls much work still to be done, Any conclusions reached at this
continues
point will need to be updated In the light of new information that arises as the Investigation
2, Our preliminary conclusions at
b
Co)
d
€)
software;
We are aware of 2 incidents where defects or ‘bugs’ In the Horizon software gave rise to 76
branches being affected by Incorrect balances or transactions, which took some time to
Identify and correct;
Occasionally an uriusual combination of events, suchas a power or communications. fallure
during the processing: of a transaction, can-give rise a situation where timely, accurate and
complete information about the status: of a transaction is not immediately. available to a
SPMR;
When individual SPMRs experience or report problems, POL’s response can appear to be
unhelpful, unsympathetic or simply fail to solve the underlying problem, The lack of a ‘user
forum’ or similar facility, means that SPMRs have little opportunity to ralse issues of concern
at.an appropriate level within POL;
The lack of an effective ‘outreach’ investigations function within POL, results in POL failing to
identify the root cause.of problems and-missing opportunities for process Improvements;
The end of Trading Period processes can be. problematic for individual SPMRs, particularly If
they are dealing with untesolved Transaction Corrections (‘TCs’). The lack.of a ‘suspense
account’ option means that it 1s difficult for disputed TCs to be dealt with in a neutral
manner,
8 July 2013
Ron Warmington CFE, FCA
Second Sight Support Services Ltd
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Interim Report into alleged problems with the Horizon systern
Spot Review SRO1 Appendix £
1,1, The SPMR reports that there were intermittent internet connectivity problems on 4" October 2012, i
Online payments and withdrawal transactions were sometimes successful, but also failed on
connection, Some tatd payments. had to be attempted two or r three times afore _ accepted,
n
pp tolyLOW2-hes,-a-customer-tuad.to.pay.hls.£76.09.telephone blll with his bank debit
nat ul was not siuesssfll The customer then withdrew £80:00 cash and used this to pay the
telephone bill,
1.2, The SPMR stampad the customer's telephone bill as evidence of recelpt of payment, returning I
change of £3.91, Several weeks later, the customer returned from holiday to find his telephone had I
been cut off due to non-payment of the bill, The SPMR’s: examination of the Transaction Log
showed that all componerits of the transaction had been reversed by POL, The SPMR states that he
did not Initiate those reversals, nor did he recelve any-reversal notifications.
ti 1.3, The SPMR raised this as an issue with POL but was told that due to cost Issues the Horizon I
transaction data, necessary to fully investigate the matter, could not be requested, The SPMR felt I
that it was implled:that‘he had stolen the money when he was told to make. good the shortage, This i
meant that-2. people had paid the telephone bill: the customer who handed cash to the SPMR, and i
also the SPMR on Instructions from POL to make good the shortage, after POL centrally had paid the I
bill.
1.4, The SPMIR was subsequently informed that he should have had a surplus of £76.09 due to the {
reversal of the transactions,
4.5. POL's 10-page response to:'Second Sight asserts that the Spot Review does nat demonstrate any
failing In Horizon and that the root cause of the difficulties suffered by the SPMMR was his-fallure to
follow. the on-screen and printed Instructions given by Horizon, POL states that the SPMR should
have realised that some transactions had. been automatically reversed because:
a) when the transactions in question first failed to be processed (because Horizon could hot get
a response from the Datd Centre), Horlzon asked the SPMR whether he wished to cancel or
von retry the transactions in response to which the SPMR opted to retry the transactions; }
b) when'the transactions failed again, the SPMR opted to-cancel the transactions;
c) Horizon then automatically disconnected and printed a "disconnect" receipt that showed the
transactions that had been automatically reversed;
qd
a standard customer recelpt was not produced and this should have told the SPMR that the
full transaction had not proceeded;
@
following the disconnect, the: SPMR was required to log back.on and, as part of the standard
recovery process, Horizon printed a "recovery" recelpt which again showed the transactions
that.had been reversed and those that had been recovered.
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16,
POL's response states that there were 4 attempts (at roughly 45 second Intervals) to send the
completed basket of transactions to the Horizon Data Centre. All atterpts used-a mobile phone
(back-up) connection, The SPMR’s records all show these connection attempts to have falled.
However, from the Data Centre's perspective, ore of the attempts did result in all of the data in the
Horizon.transastion.thaskat. being. successfully. transmittedstosthenDatnsGentrecbufssdutatntien mcm
connectivity Issues, the branch did not receive-a confirmation of this at the time from the Data
7,
18.
1,45.
‘The cash. withdrawal transaction for £80 could not be cancelled as this had already been processed
by the Bank,
‘The net effect of all of this was that, whilst the customer’s telephone bill was not paid, the £80 debit
to his bank account was correctly processed, even though this was not reported to the SPMR at the
time this transaction was entered on the Horizon terminal. The success of this part of the
transaction was. only notified to the SPMR after the customer had left the Branch, It took
approximately 5 minutes for the retry, recovery and reconnection processes to finish,
. Procedurally, the SPMR was at fault here because he was not meant to allow the customer to leave
the counter until Horizon had finished Its Recovery Processing,
. The SPMR had stamped the customer's telephone bill as proof that it had been paid, at 10:32 hrs,
but he should not-have been given it-to the customer until the Horlzon system had printed out all of
the Session Receipts. This-did not-occur until 10:36-hrs, which was after the custorher had left with
his stamped. telephone bill. It was therefore Impossible for the SPMR to return the customer's
£76,09 of to retrieve the recelpt-stamped teléphione bill.
. Second. Sight-Is more sympathetic to the: SPMR’s position than POL appears to have been: POL's
view {s that the Horizon system operated as designed. In our view, timely, accurate and complete
Information was not presented to the SPMR at the time the transaction occurred. The: delay In
providing this information was a significant factor In the SPMR falling. to follow the correct
procedure,
. At the time this problem occurred, there were multiple telecommunications failures in the branch's
main data link and Horizon was using a mobile phone link to communicate transaction data over a
poor.quality signal,
. When operating, in that degraded mode, with a complex multi-part transaction {involving
communications to the banking system as well as to Horizon), the Horizon system did operate In
accordance with Its-desigh.
. But, not being able to feverse the customer's. banking transaction (the £80.00 debit card
withdrawal), Horizon relied on the SPMR being able to give the customer all of his money back and
either turning him away with ‘his telephone bill unpaid or starting the whole process again,
Even if the customer had still been present when the recovery processes were completed (five
minutes after being handed his stamped telephone bill) and even if the SPMR had been able to
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immediately work out what had happened and what remedial actions were necessary, this would I
not amount to an acceptable SPMR/Customer experience. It also ralses questions about the
suitability of the mobile phone backup connection and:whether a more resilient service should be
provided,
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Spot Review SROS Appendix 2
1.1, This SPMR states that on Tuesday 19th August, 2008 he observed an individual in the basement (or
a boiler room type area with lots.of pipe work) of the Fujitsu office in Bracknell who demonstrated
scveentieereemnmemienendll Ability to,pass transactions directly inte the Horizon system and in so doing to alter, in real time
or overnight, the recorded holdings of Foreign Currency {n POL Branch Offices, The SPM also
wanne on sone stated-that this.person, after.altering.abranchs.gash.balance, then, "made light of it” saying "’d
better reverse that entry now or he'll have a shortage tonight,”
1.2. The SPMR further states that the person did this by generating an. outgoing remittance for @ branch
(known as a ‘Rem Out’),. The SPMR explained that what he observed was contrary to POL's-repeated
reassurances that any form of remote access’ to Horizon transactions at brarich level was possible.
1.3. Of potential significance Is the alleged comment that “he‘ll have a shortage tonight.” This could
mean that the alleged transactions were not directly input to Horizon but to some other system that i
was linked to Horizon by way of overnight:batch processing, or in some other way.
1.4, To put this allegation In context, over two years later, ina 7th December 2010 letter to Alan Bates
(Chairman. of the JFSA), sighed by Mr. Edward Davey, MP (the then. Minister for Employment
Rélations, Consumer and Postal Affairs), Mr, Davey gave the following assurance:
"! recognise that.the core of the JFSA's concerns relates to the Horlzon system to which you :
attribute the financial discrepancies and shortages which have led to a number of {
subpastmasters having their contracts terminated and subsequent court action, However i
POL continues to express full confidence in the Integrity and robustness of the Horlzon.systern
and also categorically states that there is no remote-access to the system or to any individual
branch terminals which would allow the accounting records:to he manipulated ln any woy:"
POL's response states that:
a) In August 2008, the basement of Fujitsu's bullding did contain a Horizon test environment
with access to four test versions of Horizon;
b) It is thls test environment that Is believed to have been witnessed by-the SPMR;
c) This test environment was not physically connected to the live Horizon system so It was not
physically possible for the alleged transactions to have occurred. It ts possible that t
someone showed the SPMR some form of adjustment to the test environment that was
misunderstood.
1.5, Simply stated, POL has rejected this allegation, stating that none of Its staff who were present at the
alleged 19"" August 2008 meating; had-any access to live data.
1.6, POL has suggested that its employee nay. Indeed have used the phrase "this is the live system"
because, in addition to the test version of the then un-released hew version of Horizon (JHNG-X')
being accessible from there, so was a test version-ofthe then-current and live (old) Horizon system,
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17,
It is unfortunate that, due to the length of time that has elapsed since the alleged visit, neither POL
nor Fujitsu were able to Identify any Individual who met with the SPMR on the date of his alleged
visit to Bracknell.
1,12.
1.43,
144,
vide eyes
of 7 POL employees believed to have been working
time.
in the Ful}
Itsu office at Bracknell at the relevant
. Unfortunately, due to-a.change In emall systems, emalls from 2008 have not yet been provided to
us, but we have reviewed the relevantemail records for 2011. This review has shown:
a) Anumber of different teams of POL employees were working in the Fujitsu office In Bracknell
in 2014 and possibly earlier, These teams were located on the Ground Floor and the 2" and
4" Floors of the Fujitsu office,
b) An-email sent to a number of POL employees in. April 2041, Including @ tember of the
‘Testing team In Bracknell, included the following comment:
“Although It is rarely done it is possible to Journal from branch ‘cash :accounts,
There are possible P&BA. concerns about how this would be perceived and how
disputes would-be resolved.”
, “PRBA” refersto ‘Product and.Branch Accounting’, which Is a team within POL that Js resporisible for
the back-office accounting system.
POL has told Sacond Sight that the comment noted above describes a rhethod of altering cash
balances In. the back-office accounting system, not Horizon. We note however that any changes to
Branch Cash Account balances In this way would be subsequently processed in Horizon using the
Transaction Correction (‘TC’) process. This would be notified to SPMRs and.requires their consent In
order for the TC to be processed, The TC process: typloally runs on an overnight basis and Is
necessary to ensure that the back-office accounting system remnains-synchronised with the Horlzon
system.
Second Sight notes that this method of ultimately’ adjusting branch cash accounts in Horlzon Is
similar, but not identical to, what was described by the SPMR, albelt in-an Indirect rather than a
direct way, We-have subsequently been. told that hone of the POL ‘employaes working In Bracknell
in 2008 had access'to the back-office accounting system.
We are left. with a conflict of evidence on this Issue and our enquiries are continuing, particularly in
the'light of the new Information confirming that the meeting on 49" August 2008 did in fact occur,
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Spot Review SR21 Appendix 3
1.41, This SPMR. reports a situation where, on 4” Nov 2009, the Horlzon system appears to have
generated @ series of transactions, reversing four Positive Stock Adjustments (‘SAPs’) that she had
cdoat-OO:0dches thatmerning The SARs-related.to.15,526.stamps. left over fromthe previous
Christmas.
1,2.. The aggregate value of the four SAPs Input by‘the SPMR was £5,577,93, Subsequently, 9 separate
Negative Stock Adjustments (transaction reference: 'SAN') appear to have been” generated
automatically by Horizon, Those nine entries total £6,892.23 which equate to 16,834 stamps, All
nine entries were timed at 12:22 hrs and show the SPMR's Identification Gode (le, as though she
had entered them).
1,3, The SPMR, however, denles- executing any of these SAN adjustments. She states that she was
unaware of thelr existence until long after the Audit of her Branch, She has no {dea whether they.
had any impact on the shortfall attributed to her,
4,4, We have found no-evidence that POL investigated this combined-set of transactions or, If they were
investigated, that:the findings were ever discussed with the SPM,
1.5. A POL Auditor on 6th January 2020, after beconting aware of the large. quantity ‘of excess stamps:
held by this Bratch, asked the SPMR:
“Why didn't you declare your stamps?"
16,
‘The SPMR states that se told the POL Auditor that she did declare the stamps using the SAP
procedure, ft ig not clear whether the eventual £9,616.66 shortfall, for which POL held the SPMR
accountable, included the impact of those stamps.
17,
The SPMR is adamant that:she raisedthis issue with the POL Auditor but states that she was never
provided.with any answers. Neither the problem with the stamps, nor the SPMR's assertlons about
Intermittent problems with the PIN Pad, raised both at the. time of the Audit and In, subsequent
Interviews, seem to have bean adequately addressed by POL's investigators,
1.8, POL's 3-page response to this Spot Review states that:
a) Horizon does not generate automatic stock adjustments. The function simply does not exist
within Horizon;
b) The stock adjustments questioned In this Spot Review were all recorded agalnst the SPMR's
user JD which demonstrates that those transactions were manually conducted tn the
branch;
¢) Even If there were erroneous stock adjustments, these adjustments could not cause the
SPMR to suffer a shortfall due to the “double entry" balancing process Inherent In Horizon,
1,9. POL's response does suggest a possible explanation as to what happened here, stating:
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"The appearance of positive and negative stock adjustments for stamps made by SPMRs on
the same. day reflects a common non-conformance issue In the manner by which SPMRs
inputted data, It led to significant branch conformance instructions In 2009 to encourage
branches to record thelr rationale for why they were.using the stock adjustment function."
and. continuing:
“Adjustments of the ‘ype shown at this branch are indicative of a situation where branches
standard Ast class or + spect issue commemnortitive ast clos. Post offte requires ‘sales via
the correct Icons to properly drive sales, remuneration and billing data, However, branches
found It easier to serve customers by adjusting stock out of “Specials” into. "Standard"
categorles and then making sales from those Standard icons, It is however impossible for
Post Office ‘and Fujitsu to say for certain why the.SPMR made stock adjustments in this
particular branch."
1,10, Once again, we are dealing with.a. conflict of evidence where the SPMR states that she did not enter
the stock adjustments and POL states that the Horizon system could not have entered them either,
POL has; at Second Sight's request, produced the. underlying Horizon detailed transaction data and It
will be examined to try to establish what really did happen.
1,41, In any event, POL did not arrive at agreement with the SPMR as.to what had happened. This failure
to arrive at closure has left this SPMR with the powerful and lasting conviction that her "mysterious
£9,616,66 shortfall" vas wholly of partially accounted for by those transactions that she says she did
not enter, everi though the system says, on the-basis of her User ID, that she did,
‘1.42. Further contact with this SPMR indicates that she remains confused.as to what really happened so tt
is possible that the: £9,616,66 shortfall was the result of mistakes made by her or by her staff,
Further investigative work {s therefore needed and,.as. yet, Second Sight cannot reach a firm
conclusion on this case,
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Spot Review SR22
ah,
~~ ts-findings-In-respeat-oF those differences meena manne pannenan
Appendix 4
This SPMR reports a situation where the Camelot and Horizon records for 'Remitted In' (or
‘Remmed- an) Camelot Scratch Cards a Instants) were. out of synchronisation and were Incorrectly
In substantial (esses ‘being incurred oat that POL ‘aid to only Investigate and/or to communicate
etween the two systems resulted
13.
14,
45.
1.6,
7,
1.8,
1.9,
. As an example of this, the SPMR reports, that on 17th February 2010, the Horzon printout oF
‘Rernmed-in’ cards shows £1,280 worth of cards (8 full. packs) whereas a POL-produced Excel
spreadsheet shows that, on that date, £2,080 worth of cards (18 full packs) were Remmed in, The
difference here is £800, which was.a shortfall that the SPMR had to make good,
It Is clear that this SPMR experlenced numerous problems with Scratch Cards and a review of TCs
{ssuad to the branch shows that, between 3rd November 2009 and 29th September 2010 (the
period during-which unexplained losses were occurring at the branch) 36 of the 47 TCs issued to this
branch'related to'Scratch Cards, Also, 13.of those 36 TCs were for amounts exactly divisible by £160
(Le. the value of a full pack of Scratch Cards).
Those 13 TCs comprised 4 Debit TCs totalling £2,560. and 9 Credit TCs {which serve to reduce the
branch's: stock value) totalling £7,840.
Together therefore, the 13 TCs produced a net deficlency of £5,280, In pure monetary terms this
was approximately 36% of thé total shortfall of £14,842. that POL claimed, In the ensuing criminal
prosecution, had heen stolen by the SPMR,
POL seems to have been aware, well before February 2010, of errors made by many SPMRs In
dealing with Scratch Cards, For example, an article in'the.17-23 January 2008 Issue of Branch Focus’
had warned SPMRs that:
"Mn the last three-months there have been over 1,100 Transaction Correction notices Issued
to branches to-a value of £744,000",
We have established that during the relevant period, all packs of Scratch Cards should have been
activated on the Camelot terminal before being Remmed-in to Horizon, The SPMR asserts that she
was instructed not to do that by POL,
{t also transpires that a change to standard operating procedures for Sératch Cards took place a
week after this particular SPMR was suspended in September 2010, From this point, SPMRs were no
longer required to remit packs of Scratch Cards into Horizon.
It follows, that after September 2010 it was impossible to have packs of Scratch Cards recorded In
Horizon whilst awaiting activation, It Is also clear that a balance should be struck before the start of
trading on a Thursday morning, rather than at 17:30 hrs on a Wednesday evening, as had bean the
standard practice of this SPMR.
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1.10,
In its response:to this Spot Review, POL says that it cannot find any-evidence that there Is. a problem
with the Horlzon:system with regard to Renmed-in Scratch Cards,
POL also states-that, during the period being examined in this Spot Review, if SPMRs had correctly
4n the Hort:
the end of each day would match the final figure In the:-Camelot system To
ard:
122,
1,13,
1.14.
1.16.
“447.
1.18.
POl’s Investigation Nas established tat, On L7tH February 2010; there-were-2-remttten tong
relating to Scratch Cards at this branch. It follows, says POL, that two receipts would have been
automatically produced by the Horizdn system. The discrepancy In the figures on that day resulted
from the SPMR presenting only one of the two receipts. The SPMR, however, disputes POL's
assertion, stating that not only did she not make that second entry in Horizon but that she can't.
recollect ever Remming-in two Scratch Card entries within a'5 minute period.
POL has-also told.us that:
"eyrther to the discovery of large Scratch Card losses at:Post Office branches (for example
£147,000 In aggregate losses were discovered following the audit of 20 branches In and
around May 2009), a process change was rolled out-during January dnd February 2012, This
process change was designed to significantly reduce loss/waste assocltted- with Scratch
Cards".
‘the SPMR wascharged with Theft and False Accounting but the Theft-charge was dropped on the
basis. that the SPMR pleaded guilty to False Accounting. The SPMR was convicted on the False
Accounting charge and an order made to repay the £14,842, plus costs of £1,000 and 120 hrs of
Community Service, The total of £15,842 was repaid before the court-assigned deadline,
. the key issue here, that seems to have been the root cause of this branch's frequent
Camelot/Horlzon problems, .was the difference between the opening hours-of the shop-and its Post
Office Counter. The shop. was open from 06:30 hrs untit 21:30 hrs from Monday to Saturday and
from 08:00 hrs until: 22230 hrs dn: Sundays, Whereas tts Post Office counter was only-open from.09:00
t0.17:30-0n Monday:to-Friday and from 09:00 to 12:30 on Saturdays,
The difference In operting times, particularly on Wednesdays when halancing (Incorrectly) took
place, and at the end of each Trading Period, meant that the shop was selling Seratch Cards both
before, and then long after, its Post Office counter (and therefore the Horizon system) was able to
record them,
It was perhaps Inevitable, in ‘opanvall-hours' outlets Ike this one, that the Horizon and Camelot
systems would be ‘out of sync’ a great deal ofthe time. It took some time for POL to recognise that
Its standard operating procedure was presenting a real challenge to this type of retail outlet,
Second Sight notes that the February 2012 system change eliminated the possibility of
synchronisation errors between the two systems. This was after a number ‘of Interim process
Improvements,
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1,19. The fact that the synchronisation process between the two systemis is now far better than it was In
2010 seems to give some support to the SPMR's assertion that the then-existing process was
deficlent and that her consequent errors were a material factor in the confusion that ultimately led
to her conviction for False Accounting.
1.20, Further investigative work \s neaded to get to the bottom of this complex matter.
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‘itis 1p © paper which has been lssued by the agreement of Post. Office Limited and
the Justice for Subpostmasters Alffance (QIFSA):
Post Office Limited Is concerned to hear about and determined to thoroughly and
aven-handedly Investigate cases where there have been persistent assertions that
the Horizon system (Horlzon) may be. the source of unresolved shortages In Post
ced,
Post Office Liinited cares about Its agents, the thousands of subpostmasters and
gubpostmistresses (SPMRs). operating branches across the land for the benefit. of the
community, Post Office Limited is committed to the Highest standards of corporate
governance, openness, probity and accountability. Jt is happy to ba sensibly
challenged and believes this to be-a.good thing,
Post Office Limited also acknowledges that there may be a concern that some SPMRS.
might not expresa thelr conceths because they feel that speaking up would be:
detrimental to-their position, that they may also fear that they will be harassed or
victinised If they speak out, and. that th these circumstances they may prefer to
ignore thelr concerns than:to-report them.
pst Office Lmnited would Iike.to take this. qeaartunity.te emphasise thst these fears
are.unfounded. Although SPMRs are not employees of Post Office Limited, Post Office
Limited takes seriously amy such allegations.
therefore Post Office Limited, working with JESA, ts setting out In this decument @
process where you cait raise concerns regarding Horizon, and fée! carnfortable about
doing so. Any Investigation of any concerns which you may ralsa will not tnfluence
or ba-Influenced by any diselplinery or network transformation actlons that already
‘affect you. ‘
‘this process also applies to all Post Office Limited employees, contractors and
agency staff working with Horizon for Post Office Limited.
In summary this document alms to:
«peagsure you that you should have no faars- about ralsing any concerns over
Horizon, including over victimisstion and reprisals;
~provide:you with 4 process. for valsing. any such concerns;
» demonstrate to you that your concerns will be taken sertously and that-you .
will get a response to your concerns; ard
~ give you options If you are still not satisflet,
I
{
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However Post Offlce Limited-takes deliberate fraud, dishonesty and illegal conduct
_eagalastJbvery en action.
has reasonable sus} ns regarding the sam
cue _, Songerns through this process In. good falth, and not frivolousty, maliciously ar for
if Ban: oe ne eam Sonn rowan fe enngeennen oto
‘There are two steps you can take ta Volcé your concerns. You can either contact
JFSA In the first Instarice (see tA). below), or you can go directly to Second Sight i
Support Services Limited (Second Sight), an Independent third party which Is already !
undertaking @ review of several Horlzon cases In consultation with the Right :
‘ Honourable James Arbuthnot MP (see (B) below), i
\
(A) Initlal Stans vou.can take with JESA
1. You can discuss any concerns with JESA and/or tts advisers (contact details at
jfsa.org.uk), JFSA undertakes to treat these discussions as. confidential, It Is
‘then your decision as to whather or tot you wish to pursue your concerns
through the Inquiry Route sat out In-Sectian B below,
2, If you dacide to discuss your concerns with JFSA, you should make sure you
. gather all your evidefice together Including all relevant documents, transaction
references, helpline references, copies of correspondence; contact details and.an .
outline of your concerns and any subsequent discussions with Post Office Limited.
You should retain all original documents at this time although they may be
required later,
3:-You: should provide JFSA with photocoples or PDF copies of all relevant documents,
which will.be examined by JFSA and/or JFSA's advlyers.
4, At this time JFSA undertakes that It will keap all information strictly confidential
and nether Post Office Linited nor Second Sight will be made aware of any
discussions with or submissions to JPSA, JFSA undertakes. not to reveal any
detalls about you, your FAD code or brahch location to Post Office Limited until
JFSA agrees with you that-your-concerhs will-be raised. as part of the Inquiry.
(8) TheInautry Route ~ an Overview
1 The Inquity will. be carried out by Second Sight within a "no blame” framework,
2, Tf you aré a Hotlzon user (whether as-a Post Office Limited. employee, contractor
or a former or existing subpostmaster), you. can subrnit-your experlences of and
concerns with Horizon for consideration under the Inqulry through JFSA or by {
contacting. Second sight at Tythe Farm, Maugersbury, Cheltenham,
Gloucestershire GL54 AHR, You must do this by 28 February 2013.
3, Except in a case where deliberate fraud, dishonesty or Illegal or unlawful conduct ot
Ig suspected, no Information voluntarily submitted for the Inquiry th good faith v4
will be used for any purpose other than the Inquity. However, Second Sight may I
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I
respond to any {ssues or questions arising out of the Inquiry,
(©) The.snquicy,= the, Qatall :
Detalls of the Renilt, Conduct and Output of the Inquiry are set out In the Appendix Hl
ta thls document. i
‘If for any reason you are not satisfied with the-findings and: wish to take matters :
fargher, you are. of course free to pursue other avenues whith JFSA oan help you :
with, b
Equally, If Post Office Limited haa gaod reason to suspect that there may Indeed
have been fraud, dishonesty of other Illagal or unlawful conduct; It may dectde to {
purawe-such roatters In the elvif or criminal courts.
’ I
Dated:
Issued by and on behalf of Post Offley Limited
GRO I
Signed i.
beeen
troued bya ReetalLo 255A I
_—
Signed.
momar an nace
pport Services Limited
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ne
APPR T= = —
The Remit of the inquiry
The remit of the Inquiry will be to consider and to advise on whéther there are any
systemic Issues and/or concerns with the "Horizon" system, Including training end
support processes, giving evidence arid reasons for the conclusions reached,
The Inguiry Is not asked.to investigate or somnment on general improvements which
might be made to Horlzan, of on any: Individual concern raised (see below) save to
the extent that It cordudes that such Investigation or comment is necessary to
address the remit, .
The Inquiry Is not a mediation or arbitration, Tk is not Intended to resolve or affect
ony dlgpute there may be between any Individual Horlzon user and Post Office
mited,
‘The Conduct of the Inquiry
1, Subilssionofconcerns
As highlighted, you ¢an ralse coricerns diractly with Second Sight, However, you t
must do so by 28 February 2013,
By submitting @ concern you will have ugreed that st may be taken forward Into the
Yhquiry prowéss, and that as a consequence. Post Office Limited may become aware
of the content pf the concern, .
When suomitting & concern, you should seek to enstire that you Include all of the
relevant facts.of your experience of Horizon. You should (nclude.a written summary
of the concer, all relevant documents, ‘contact detalls, transaction references,
helpline references, copies of correspondence, an outline description of the error
Incldant and any subsequent discussions. with Post Office Limited,
Second Sight will decide whether It will Investigate an Individual concern In detail as
part of thé Inquiry, having ragard to the remit. Second Sight may consult JPSA Ir
connection with this decision, The thqulry will not consider any concern which
+ pacomes the subject of a clvil or-crimindl-court case.
2, No.Blume. Frameworts
Tf
+ your coricern Is submitted in godd falth;
~ you honestly and reasonably belleve at the me of submilsston that the facts It»
contains are substantially true and complete, so far as you Know;,
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< the concern j8.not submitted with the Intention of making parsonal-galn. (for the
Elem
cutouts errobettiie)
SPMRs gétierally may benefit from the outsome of the Inquiry); and
» the concern does not reveal conduct which 'ls or-which Ig Iikely to ammount:-to fraud
appt rirertrner staf fene roi ey Yet
and sulject to there being ro overtiding public interest to the contrary, Post Office
Urhited will not subject you to any detriment elther asa result of having submitted a
concern, or 38 a result of Post Office Limited becoming aware of any Information
contained within a concern, For the avoldance of doubt, Information already known,
to Post Office Limited at the time that the concern Is submitted may continue to be
used by Post Office Limplted for any purpose,
i
{
'
1
Post Office Limited will pay Second Sight to conduct the Eauiry within: a-total budget
agreed between Post Office Limited and Second Sight, Second Sight will ‘be
contractually: obliged to cornplete the Inquiry within the agreed total budget, anid
both Post Office Limited:and JPSA will co-operate with Second Sight to facilitate this,
If the agreed total budget Is or Is likely to be reached before a report has beet)
published, Post. Office Liralted and JFSA will meet to discuss options. ©
All information recelved by Second Sight fron’ whatever-source In connection with
the Inquiry will be held confidentially and will only’ be used for the purposes of the
Inquiry.
3PSA can provide Sacond Sight with anonymised coples of any or all coneerns to
enable Second Sight to conduct the Inquiry. Second Sight may provide any such
anonymised documents to Post Office Limited so that {t can provide Input and
asaistance.to the Inquiry,
Post Office Lintited may provide Second Sight with lks own comments on any or all i
gonearns, and.on Hortzon generally. {
In order to carry out the Inquiry, Second Sight will. be entitled to request Information: }
related to-a concern from Post Office Lirsited,-and If Post Office Limited holds that I
information, Post-Office Limited will provide It to Second Sight.
Post Office Limited will pkovide Second Sight with such hardware, software and
technical {nforriation and adrnintetrative support as Second Sight may reasonably I
require to-carry out the Inquiry. .
Second Sight will ‘determine the process [t will follow for the Inquiry using Its i
judgment, after consultation with Post Office Limited and JFSA,
The Output of the Inquiry
Second Sight will consult with JFSA, Post. Office Limited, and/or any other party es tt
considers necessary before producing-any report, No party may Introduce any whatly
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new Issue or coricern at this: stage, and the parties will each keep the consultations
_ with Second Sight tnd thelr contents confidential.
Second Sight will consider and take Into account any comments-received from JFSA, \
Post-Offica~kimited~and/or-anyother ~consulbed party, arid May. cOndUCE. AURA BE. ree I —
If nev In Night of the comments (having. regard to the agreed ~
total budget), Second Sight will then produce the report a date ae
Post Office Limited and Second Sight,
‘The report will report on the remit and If necessary will coritatn recommendations
and/or alternative recommendations to Post-Office. Limited relating to the Issues. ard
concerhs investigated: during. the Inquiry. The report and reconimendatigns are. to be ¢
the expert arid: reasoned opinion of Second Sight tn the light of the. evidence seen if
during the thqulry.
‘The report may be published. Until It Is published, JFSA (and tts advisers), Post Office
Limited, and any other party consulted by Second Sight will keep the report and
evidence confidential.
Second Sight will prepare the report so that so far ass reasonably possible, It may.
be published without redaction of personal data and/or Information that Is
confidential or-commerclally sensitive for Post Office Limited ar any Horizon. user,
bearing In mind the primary need to ensure that the report Is. reasoned and evidence
based.
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STATUS: DRAFT
author:
Version: 1
Last edited by: RM
Last edit date, 12/06/2013
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Horizon date - ay
Executive Summary
art te
04/10/2012 at 10:42 for a British Telecom bill payment for
£76,.09) this was paid for by a Lioyds TSB cash withdrawal for
£80.00 and change give for £3.91. At 10:37 on the same day
ra ff SLIT payee “war “reversed out rersitr
settlement,
The branch was issued with a Transaction Correction for
£76.09, whioh they duly settled; however the postmaster denied
reversing this transaction and dmvolved a Forensic Accountant
as he believed his reputation was in doubt.
Reviewing the data
On looking at the oxedence data, it clearly indicates that the
reversal was completed by JMBBMM) (postmaster) at 10:37
04/10/2012 and was reversal indicator 1 (existing xeversal)
and settled to cash. An existing reversal is where the session
number/Automated Payment number has to be entered to reverse
the item. (Copy in Appendix 1)
The fujiteu logs were requested for this branch, but whilst
waiting for these to arrive communications took place with
Gareth Jenkins at Fujitsu for more details to gain an
understanding what had occurred at this branch.
Questions asked and extracts from various emails in response.
Question - T am requesting fujitsu logs for <>
look at a xéversal that the postmaster denies transacting, do
T need to request further details, and also could you explain
what happens when the system fails, (Gareth looked at data at.
his end prior to me receiving the fujitsu logs. (Copy in
Appendix 1).
Answer - This shows that Session 537803 was successfully saved
to the BRDB, but when the user Logged On again
Recovery reversed the session in session 537805.
tt ien’t clear what failed, but if it was a comms error, then
the system would have printed a disconnected session receipt
and the Clerk should have given the customer £80 and told him
his Bill was unpaid, The fact that there is no indication of
such a receipt in the events table suggests the counter may
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have been rebooted and so perhaps may have crashed in which
case the clerk may not have been told exactly what to do.
The reversal was due to recovery (Counter Mode Id = 118) 80
this was nok an explicit reversal by the clerk, This scenario
is fairly vare so it is certainly quite easy for the clerk to
take and either he or the custemer could be in
Si
it should. (email 30/01/2013)
Question ~ I can olearly see the recovery reversal on the
STE FL ESU LOGS LESCOL VEC, OWE WOUL OEM Me Te Se SET LAE A ce
not previously discussed this issue. (Copy of transactions
and events in Appendix 1)
ic}
The system is behaving as
Answer ~ Note that the standard ARQ spreadshest may not make
it easy to confirm that the Reversal was part of Recovery, but
the underlying logs used to extract them can show it, (Emadl
30/01/2013)
The files 4 bo 25 Oct 12,xls and Bvents 4 to 25 Oct 12.xls are
part of the standard ARQ returned, Rows 141 to 143 of 4 to 25
Oct 12.x19 clearly show a Reversal, Also Row 70 of Events 4
to 25 Oct 12.xls shows that session 537803 (ie rows 138 to 140
of 4 to 25 Oct 12.x1s) has been recovered and this event has
the same timestamp as the Reversal Session. Also row 71 of
Events 4 to 25 Oct 12,xls shows that a receipt was generated
from the session 537805 (not explicitly, but it was the only
session at that time). This receipt would have told the user
that a. Rollback had taken place (but. the logs don’t make that
explicit), If that is sufficient for you purposes, then you do
have all you need in the standard ARQ.
However what I was able to confixm from my look at live data a
couple of weeks ago and is also held in the underlying raw
legs is confirmation that the yeversal was generated by the
gystem (and not manually by the user), What might also be
available in the underlying logs is whether or not the system
was rérbooted - Tt suspect it was but have no evidences one way
or the other (and it isn’t in what was extracted this time {
either). % can confirm that the user did Log On again (row 69
of Events 4 to 25 Qet 12,x1s). (Bmail 11/02/2013)
Question - TI can see where this transaction is and now
understand the reason behind it, My main concern is that we
use the basic ARQ logs for evidence in court and if we don’t
know what extra reports to ask for then in some dirounstances
we would not be giving a true picture.
I know you are aware of all the horizon integrity issues and I
want to ensure that the ARQ logs are used and understood fully
by our operational team who have to work with this data both
in interviews and in court.
Just one question from my part ~ if the reversal is system i
created but shows as an existing reversal, could this not be
reflected with a different code, .i.e. SR (system reversed) to
clear up any imitial challenges. My feelings at the moment
are not questioning what Horizon does as I fully believe that
it is working as it should, it is just that I don’t think that I
some of the system based correction and adjustment
transactions are clear to us on either credence or ARQ logs.
Answer ~ I understand your concerns. It would be relatively
gimple to add an extra column into the existing ARQ report
spreadsheet, that would make it clear whether the Reversal
Basket was. generated » Retovery or not, I think this would
address your concert. tm now ets" rontaT
for changing the report layout. Penny can you advise as to the
process: “fe CHEW Gone through aw CR? (wttekI~19/02/20219) ne
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Recommendations
I do believe that the system has behaved as it should and I do
not see this scénario occurring regularly and oreating large
‘losses. However, my ¢onderns ate that we cannot clearly see
what has happened on the data available to us and this in
itwel£ may be misinterpreted when giving evidence and ueing
the same data for prosecutions.
My recommendation is that a change request is submitted so
that all system created reversals are @learly identifiable on
poth fujitsu and credence.
Security - Fraud Analyst
12° gune 2013