Statement
“The Post Office is fully confident that the Horizon computer system in its
branches, and all the accounting processes around it, enable subpostmasters to
account accurately for the transactions and balances they record.
“The system has been operating for over ten years. In that time, thousands of
subpostmasters will have used it in performing many millions of successful
weekly and monthly financial reconciliations between the cash they have in the
office and the transactions they have handled. The Horizon system has been
rigorously tested. The National Federation of Subpostmasters, which represents
subpostmasters throughout the country, has expressed its full confidence in the
accuracy and robustness of the system.
“All three cases that Inside Out has raised have all had their contracts
terminated following the most thorough investigations by the Post Office. In two
of the cases this was three years ago; in the other it was 18 months ago. They
include a case where there was a subsequent guilty plea in Court to a charge of
theft and three cases of false accounting, The Post Office has a duty to the tax
payer to ensure that individual branches properly and fully account for the Post
Office funds in their possession.“
Specific Cases Mentioned.
Mr Ward - Rivenhall.
Mr Ward was suspended in September 2008 following an audit that identified a
significant shortage in his account. The shortage was investigated meticulously
and this led to Mr Ward’s contract for services being terminated in November
2008. Mr Ward appealed against the termination, but after the full application of
Post Office Ltd’s procedures for such appeals (which are agreed with the
National Federation of Subpostmasters), the decision was upheld.
Post Office Ltd is fully satisfied that the Horizon accounting system merely
recorded the data entered by Mr Ward and his staff. The audit revealed a
shortage of funds compared to what the information entered into Horizon
indicated should have been there. There is absolutely no evidence whatsoever
to suggest the losses were down to “computer error.”
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Mrs O’Dell — Great Staughton
Mrs O'Dell was suspended on January 2010 following an audit that discovered
certain discrepancies. The situation was investigated and Mrs O’Dell’s contract
was terminated after the full and proper procedures, including a right of appeal,
had been undertaken. There is absolutely no evidence that the Horizon system
contributed to the losses and Post Office Ltd remains fully satisfied that the
system is robust and fit for purpose.
Mr Warren — Castle Hedingham
Mr Warren’s contract with the Post Office was ended in June 2008 after a large
shortage of funds was discovered at an audit. The Post Office followed all the
appropriate investigative and contractual processes before ending the contract.
Mr Warren pleaded guilty on 30 March 2009 to one charge of theft and three
charges of false accounting. On 2nd November 2009 at Chelmsford Crown
Court, Mr Warren was sentenced to nine months’ imprisonment suspended for
18 months, with an unpaid work requirement of 75 hours.
We note that you state that Mr Ward and Mrs O'Dell say that they have taken
their cases to Shoosmiths solicitors. We have received no information or
documentation from Shoosmith’s with respect to any civil claims being made with
respect to these particular branches, and the Post Office believes there is no
contractual (or other) basis for such claims. If we were to receive any civil legal
claims in respect of these cases, the Post Office would vigorously and fully
defend its position. We are fully confident in our position that the Post Office
and its systems have operated properly, accurately and fully appropriately for an
organisation that handles significant amounts of public money, and that the Post
Office has acted fully in accordance with our business contracts with the parties
concerned.
Additional specific questions asked by Maggie Dolan on 22 November
1. One of the case studies says that the Post Office does not allow independent
Scrutiny of the Horizon system. Is this the case?
Horizon and the Post Office systems environment have always been subject to
external scrutiny for both assurance and accreditation purposes. Ernst & Young
carry out an annual financial systems audit; an independent auditor also carries
out a yearly audit to maintain the system’s Payment Card Industry (PCI)
accreditation. The system and its data Centre are ISO 27001 accredited which
requires an annual audit from an independent agency. Horizon is also
accredited by HSBC Payment Services and WorldPay (Post Office’s Merchant
Acquirers) and must comply with the VocaLink standard for card payment
transactions. In addition to these regular audits, ad hoc independent audits of
the system are initiated by Royal Mail Group and supported by the Post Office.
2. Have you identified any operational faults with Horizon or other systems and
processes that interface with it which could be behind some of the shortfall
problems sub-postmasters have had?
No — the integrity of the Horizon system is sound.
3. Could you give me a timescale as to when you are likely to answer the
questions put to your Managing Director Paula Vennells by the Government
about complaints made about the Horizon system?
We assume you are referring to a number of Parliamentary Questions raised by
Mike Weir MP to which Post Office Ltd are in the process of responding. These
are not questions that have been asked by Government, they are questions
asked by an MP and as they refer to an operational matter, the Government has
said that Post Office Ltd will reply. This is in line with normal procedural practice.
4. As the operational responsibility for the Horizon system rests with the Post
Office, is there anything wrong with it?
“The Post Office is fully confident that the Horizon computer system in its
branches, and all the accounting processes around it, enable subpostmasters to
account accurately for the transactions and balances they record.
The system has been operated successfully for ten years by thousands of
subpostmasters who handle millions of transactions every day. The National
Federation of Subpostmasters, who represent subpostmasters, has expressed
its full confidence in the accuracy and robustness of the Horizon system.
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General Background
The Horizon system has been operating for over ten years. In that time over
20,000 different subpostmasters will have used it in performing many millions of
successful financial reconciliations between the cash they have in the office and
the transactions they have handled.
For the tiny fraction who have not been able to reconcile their cash and
transactions, there are tried and tested systems of checking, auditing and
following up to determine what has happened. For example, transactions might
have been miskeyed (writing 100 instead of 10), a clerk might have handed out
too much change, a clerk may have forgotten to take the money for the
transaction, there may even have been rare instances of fraud by a customer.
These checking and auditing systems resolve virtually all discrepancies
satisfactorily. These discrepancies are caused by the same kind of small day-to-
day mistakes and human errors that any large bank or retailer would experience.
In a extremely small number of cases after all these checks have been
undertaken, there remain significant missing sums that can’t be accounted for. In
such cases the Post Office may take action to end the subpostmaster’s contract
as public money is entrusted to the Post Office and it is vital that everything is
fully accounted for. If significant money is missing — either as a result of lack of
sufficient competence by the subpostmaster or their staff or, in extreme and very
rare cases, as a result of dishonesty -it is not appropriate for that subpostmaster
to continue to operate the branch, and the Post Office will seek to appoint
someone new to take over.
There have been a limited number of cases where Court Action has been taken
over missing sums of public money. In some of these cases, the subpostmaster
has made allegations against the Horizon system that records their transactions.
The Courts have consistently upheld the Post Office position that the Horizon
system is accurate and reliable. When former subpostmasters have been
convicted of false accounting and/or theft, it is, of course, the Courts that have
convicted, not the Post Office. In some cases, the subpostmaster pleaded guilty;
in others the Post Office had to provide robust evidence to support the Crown’s
case. A criminal court will only convict an individual if it considers that the
evidence has shown, beyond reasonable doubt, that the individual is guilty of the
offences with which they have been charged.
The Post Office takes meticulous care to ensure that the Horizon computer
system in branches nationwide is fully accurate. Tens of thousands of Post
Office branches have used the system to reach financial reconciliations without
difficulty.
e The Post Office is fully confident that the Horizon computer system in its
branches, and all the accounting processes around it, are absolutely
accurate and reliable.
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The Horizon system has been rigorously tested using independently-
assured, robust procedures. The Horizon information security processes
meet the relevant industry standards which apply to such organisations as
banks and building societies.
Subpostmasters are given fully appropriate training, typically including
classroom training and further time on site under close supervision and
guidance from a Post Office manager. Subpostmasters can also ring a
dedicated helpline for advice.
The Horizon system has operated successfully for over 10 years across
the Post Office network, which currently stands at more than 11,500
branches.
The National Federation of Subpostmasters, which vigorously represents
the views and interests of subpostmasters around the entire country, has
gone on record on a number of occasions to express its full confidence in
the accuracy and robustness of the Horizon system.
The Horizon system provides detailed records of every transaction, no
matter how small or large, in any individual Post Office branch. Separate
records of all key strokes in the system are stored in a tamper-proof way.
The Post Office handles large sums of public money as well as the money
entrusted to it by the 20 million people who visit our branches each week.
The Post Office rightly makes every effort and takes all reasonable steps
to protect the money in its care.
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Information about document “Losses and Gains Quick Guide for Crown
Managers
There is no suggestion whatsoever in this document to support the
assertion that losses are due to the Horizon system. In fact, the document
that you have identified is an internal management document covering
managerial processes at the branches — Crown branches - that Post Office Ltd
directly operates. The document refers to the 2007/8 year — a time when there
were 405 Crown branches. These are typically very large city centre locations
employing significant numbers of staff and having a high number of serving
positions (typically around 10 per branch) and handling around 20% of the total
business across the entire Post Office network.
The document covers the kinds of good managerial practice that any large
company handling significant amounts of cash (such as the banks) would apply.
You draw attention to the stated figure of Crown Office losses in 2007/8
amounting to £2.2m.
It is important to be clear about what this figure referred to. The figure represents
an end-of-year snapshot on the total cases where clerks have not reconciled the
cash and stock (stock here includes value items such as stamps) against the
transactions that they have undertaken. This can occur for a number of reasons.
The clerk may have recorded the transaction incorrectly (saying they paid out
£10 instead of £100); they may have made a mistake when dealing with the
customer (giving £10 change instead of £5); they may have given out the wrong
stamps (a First Class instead of a Second Class, two stamps instead of one);
they may have miscounted the amounts that a customer has paid in; they may
have neglected to retain the transactional supporting document; there may be
examples of fraudulent activities by the customer (forged documents); a clerk
may lose stamps or cash (falling behind a cupboard etc); there may be cases
whereby the clerk enters all the details of the transaction, serves the customer
but then forgets to take payment from the customer — in most cases the customer
would point this out but there are some who just walk off! In very rare cases
there may be actual dishonest activity by a member of staff.
As a result of all the above it is quite feasible for there to be both losses and
gains when the clerks’ tills are reconciled. This is a situation that can and does
occur in any bank or indeed is a situation any retailer which handles millions of
transactions per week may experience.
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The document shows the sensible managerial practice and checks that any
responsible bank or retailer would employ. None of this implies in any way
that there are any issues with the Horizon system. These kinds of gains and
losses occurred when all recording was done manually before any computerised
systems (there were similar managerial control systems and guides before any
computerised systems). Every bank and retailer will have similar approaches.
You draw attention to a particular phrase in the document and draw attention to
the words “accounting error” namely:
Additional Notes
Managers may apply some discretion should a ‘one-off large loss’ be incurred
with likely mitigating circumstances e.g. known giro error, accounting error
identified etc
This refers to situations where a large loss has been recorded but it is clear to
the manager what has happened — in this case “accounting error” is shorthand
for perhaps recording something wrongly (keying in £10000 instead of £1000 for
example). In such cases although a large loss will have been recorded, it is
known that this can be ultimately explained and corrected. All that this
“additional note” in the document is saying is that the Manager has discretion in
such cases with respect to applying the defined escalation processes of informal
and formal interviews that ultimately can lead to possible disciplinary code
activity if a clerk is making a series of mistakes. These procedures have been
fully agreed at national level with the CWU and form part of the Crown Office
Staffing Agreement.