POL00006553
POLO0006553
a.
as By
1.2.
1.3.
1.4,
de
1.6.
DRAFT - Thematic Issues Report
Introduction
[May need more of an introduction to the report]
[We may also need a Table of Contents}
The purpose of this Report is to deal with the common “Thematic Issues” that have been raised
by many Sub-Postmasters in their applications to the Mediation scheme. This has been done
in the interests of efficiency and in order to avoid duplication of facts and conclusions across
many cases. It is envisaged that this report will be a “living document” which will be updated
as further information arises.
We have adopted a modular approach to this report, with each thematic issue forming a
separate section within the report.
As a result of our review of the 150 applications to the Mediation Scheme we have identified
17 key thematic issues. Of these, 10 relate to transactional issues such as “Transaction
anomalies associated with Scratch Cards”. These 10 transactional thematic issues are
collectively described as “Type 1 Thematic Issues”. The remaining 7 Thematic issues,
collectively known as “Type 2 Thematic Issues”, cover a wide range of issues.
A table showing the link between Thematic Issues and applications for the ‘str Scheme
is at Appendix 1 and the 17 key Thematic Issues are listed in the following t:
be rearranged to reflect importance] [Should this now be the simplified version?]
[Should these
Transactions or Transaction Hardware issues e.g. printer
Corrections not entered by the Sub- problems, PIN pads, touch screens
postmaster or staff and PayStation
Transaction anomalies associated with I Failure to follow correct procedures
Cash or Stock Remittances or mis-advised by Post Office
HelpLine
Transaction anomalies associated with I Training and Support issues
Pensions and Allowances including Helpline and Audit
Transaction anomalies following Limitations in the Transaction Audit
telecommunication or power failures Trail available to Subpostmasters
Transaction anomalies associated with I Process issues at the end of each
ATMs Trading Period
Transaction anomalies associated with I The contract between the Post Office
Lottery Terminal or Scratch Cards and Subpostmasters
Transaction anomalies associated with I The lack of an outreach
Motor Vehicle Licences investigations function
Transaction anomalies associated with
Foreign Currency
Page 1
POL00006553
POLO0006553
Summary of Comments on Thematic Issues V8 Fist 15
pages only.docx
Page: 1
Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:21:54 +01'00'
5S should not share the spreadsheet as this risks unlawfully sharing personal data with other applicants (even if the spreadsheet only references
case numbers)
POL00006553
POLO0006553
Transaction anomalies associated with
Bank / GIRO / Cheques
Transaction anomalies associated with
Stamps, Postage Labels, Phone Cards
or Premium Bonds
1.7. [Also include or refer to SOPs and Acronyms]
Page 2
POL00006553
POLO0006553
2. The Contract between Post Office and Subpostmasters (ot
ad,
vie i
23.
This sections deals with 2 separate issues, Firstly the impact on Sub-postmasters of the terms
and conditions set out in the Contract and secondly, issues relating to the notification to Sub-
Postmasters of the terms of the Contract.
The ‘Standard Contract' (dated September 1994) between Post Office and Sub-Postmasters is a
114-page document, that now incorporates several post-1994 amendments. [the entire
document is shown at Attachment 1]
The Standard Contract spells out the rights and responsibilities of both Post Office and Sub-
Postmasters. The clauses most frequently referred to by Sub-Postmasters are as follows:
a) Section 17 (in the November 2002 amendment) which lists the Key Products and
Services (also referred to as the core products and services)
b) — Section 15 (in the November 2002 amendment) where the Post Office undertakes to
provide the Subpostmaster with relevant training materials and processes to carry out
the required training of his Assistants on the Post Office Products and Services... and
the Sub-Postmaster accepts the responsibility to ensure the proper deployment within
his Post Office branch of any materials and processes provided by Post Office Ltd and to
ensure that his Assistants receive all the training which is necessary in order to be able
to properly provide the Post Office Products and Services and to perform any other
tasks required in connection with the operation of the Post Office branch.
Also... Post Office Ltd may request from time to time that where it has obligations as
described above the Subpostmaster should conduct specific training (whether through
written/distance learning that may require confirmation of completion or via
presentations) in relation to certain Post Office Services (such as, but not limited to,
money laundering). Failure by the Subpostmaster to arrange for such training to be
properly applied will be deemed to be a breach of this Contract by him.
c) Section 1, paragraph 10 which requires three months notice of contract termination
from the Sub-Postmaster to Post Office and allows Post Office to:
terminate a Subpostmaster’s contract at any time in case of Breach of Condition by the
Subpostmaster, or non-performance of his obligation or non-provision of Post Office
Services, but otherwise may be determined by Post Office on not less than three
months notice.
d) Section 12, paragraph 12:
The Subpostmaster is responsible for all losses caused through his own negligence,
carelessness or error, and also for losses of all kinds caused by his Assistants.
Deficiencies due to such losses must be made good without delay.
Page 3
POL00006553
POLO0006553
Page: 3
Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:29:45 +01'00'
is commenting on the Contract inside SS’ scope of work? This is not an "Horizon or associated issue”
POL00006553
POLO0006553
e) Section 12, paragraph 13:
the financial responsibility of the Subpostmaster does not cease when he relinquishes
his appointment and he will be required to make good any losses incurred during his
term of office which may subsequently come to light.
f) Section 12, paragraph 14:
surpluses may be withdrawn provided that any subsequent charge up to the amount
withdrawn is made good immediately.
g) Section 12, paragraph 17:
Subpostmasters may exceptionally not be required to make good the full amount of
certain losses at his office. If he feels entitled to relief in making good a loss he should
apply to the Retail Network Manager.
h) Section 19, paragraph 12 deals with Enquiries by officers of the Post Office
Investigation Division and states that:
The main job of the Investigation Division is to investigate, or help the Police to
investigate, criminal offences against the Post Office, British Telecommunications and
the Department of National Savings. The Investigation Division does NOT enquire into
matters where crime is not suspected.
i) Section 19, paragraph 19 allows persons interviewed by Post Office's Investigators to
have a friend present during the interview but that that person may not interrupt in any
way, either by word or signal.
2.4. Having considered the Standard Contract in some detail we are of the opinion that the terms o}
lhe contract are biased heavily in favour of Post Office and operate to the detriment of the
jubpostmaster most of the time. Also, we have not seen any evidence that Post Office either on
vised or required the Subpostmaster to seek independent legal advice before signing the
ontract. We are also unaware of any cases where Post Office was prepared to vary the terms
and conditions of the Standard Contract at the request of the Subpostmaster.
2.5, The Standard Contract transfers substantial financial and other risks to Subpostmasters who
may not have properly understood or appreciated those risks, particularly if they failed to seek
dependent legal advice. Consequently, there is a significant risk that appropriate risk
igation measures were not implemented. Post Office has the power to require
Subpostmasters to implement new products and services and failure to do so represents a
breach of contract that could give rise to suspension or dismissal. The risk here is that Post
Office will implement decisions from which it reaps the benefits (such as by reducing operating
Page 4
POL00006553
POLO0006553
Page: 4
Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:25:15 +01'00"
In what way are SS experts in the area of contract law / commercial franchising so to permit them to offer an opinion on the faimess of the
‘terms?
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:30:59 +01'00'
All contracts operate to some detriment of someone - that is the nature of a contract in that in binds a party to a position.
What detriment are they referring to?
i Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:25:36 +01'00"
In what way is the contract biased?
@ Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:28:02 +01'00'
In order to make the statement that "SS have not seen any evidence” of SPMRs taking legal advice, SS should set out the enquiries made to elicit
this information.
Number: 5 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:26:03 +01'00"
How do they quantify that the detriment occurs “most of the time”?
Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:26:53 +01'00"
What is the relevance of POL asking SPMRs to take legal advice? Why does this make a difference? An SPMR can take legal advice at any time -
POL is not responsible for this. Also, SS do not form any conclusion from this fact so why is it included?
@ Number: 7 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:29:32 +01'00"
If SS are proposing that POL should negotiate individual terms for every SPMR, they need to make an assessment of the commercial
consequences of this approach and their expertise for forming any opinion thereon.
Note: the terms are agreed collectively with the NFSP which would negate the need for individually negotiated terms.
Number: 8 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:31:10 +01'00"
Need to identify the "financial" and “other” risks referenced here.
@ Number: 9 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:33:21 +01'00'
What evidence is there for the statement that SPMRs may have not properly understood the contract terms? At present, this is a passive
statement (the SPMR "may" not have understood). Can this be been quantified when compared to the 1000s of SPMRs over the years?
Number: 10 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:31:20 +01'00"
What is a “risk mitigation measure"?
POL00006553
POLO0006553
costs) while the risks (and therefore the costs) fall onto the shoulders of the Subpostmasters
who have no choice other than to accept the decision. (il
2.6. Post Office controls the Horizon infrastructure including back-office accounting function:
onsequence of this is that Post Office may hold Subpostmasters accountable for shortages that
they are unable to investigate. We are aware that requests for investigative support or extracts,
Horizon data are often refused. As Subpostmasters they have very limited options in these cA
circumstances and often have to make good losses, where the underlying root cause has not
been established. We consider this to be unfair.
2.7. Many Subpostmasters are unaware that, under Section 19, Paragraph 12 of the Standard
Contract, the Post Office Investigation Division (‘POID’) does not have a mandate to provide
general investigative support to Subpostmasters. There is no general outreach investigative
function as POID would only act where suspected criminality had occurred.
e also note that when a POID criminal investigation is in progress, the interviewee is not
allowed to be legally represented, although they may be accompanied by a ‘friend’. We
consider the refusal to allow the interviewee to be legally represented to be unfair.
2.9. We have been told by many Subpostmasters that they were not given a copy of the 114 page
andard Contract until long after they had committed to purchase their sub-post office; or long
care they had started work as an Subpostmaster. In some cases, copies of the Standard
Contract were not provided until Post Office commenced litigation. Post Office has stated that
its standard operating procedures require that Subpostmasters are provided with a copy of the
Standard Contract no later than the day that they start work. Evidence of the provision of the
Standard Contract is not retained. fen
Page 5
POL00006553
POLO0006553
Page: 5
Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:30:46 +01'00"
Not correct - POL can only implement changes that are "reasonable" - see clause 1(6).
Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:32:50 +01'00"
What functions are being referred to?
“Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:32:37 +01'00"
There is no explanation of the causal link between the POL's control of "back office” functions and a SPMR's ability to investigate.
Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:35:41 +01'00"
SS need to first set out the options and explain why, in their expert opinion and on what evidence, they form the view that those options are
“limited”.
Number: 5 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:35:15 +01'00"
What is the basis for the statement that POL has “refused” investigation support? Where is the evidence to support this? How has SS come to
the opinion that this happens "often" - where are the statistics to back up this statement.
Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:36:01 +01'00'
Need to explain the rational behind this conclusion with reasons and evidence.
@ Number: 7 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:35:37 +01'00'
Where is the evidence that supports this view about the collective knowledge of subpostmasters
= Number: 8 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:36:09 +01'00'
Not true - POL has several investigation functions within P&BA / FSC.
@ Number: 9 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:36:37 +01'00'
Need to check this with Jarnail
@ Number: 10 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:37:02 +01'00'
The statement about "many" subpostmasters needs to be quantified and put into context against the total number of SPMRs.
@ Number: 11 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:37:38 +01'00'
55 need to explain why they have formed the view that POL failed to provide contracts rather than SPMRs losing them / forgetting them.
Number: 12 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:37:47 +01'00'
POL does retain copies of an SPMRs signed appointment though these going missing in some cases.
PO
POL00006553
LOOO06553
3. Cash machines
a,
B12,
B38;
3S.
3.6.
ais
3.8.
Not all sub post offices are equipped with ATMs (“Automated Teller Machines”). Post Office
provided financial incentives for the installation of ATMs in some of the larger sub-post offices
in order to attract greater footfall and, as a consequence, increased sales of Post Office
products and services.
Of the approximately 150 Cases referred to the Mediation Scheme, over 20 have referred to
problems with ATMs. These have included large shortages that were charged back to
Subpostmasters by Post Office. In other cases large surpluses occurred, which caused concern (oo
to some Subpostmasters.
Most of the reports that we have seen relate to Bank of Ireland ('Bol') ATMs and to some to
HANCO ATMs. Bank of Ireland ATMs were either internal or external to the branch.
The normal cash dispensing process on Bol ATMs involved electronic interaction between the
Branch's ATM; Wincor Nixdorf; the LINK platform and the customer's bank. The ATM cash
balancing/reconciliation process involved electronic and also manual interaction between the
Branch's ATM; the Branch's Horizon system; Post Office's Financial Service Centre (the 'FSC’);
and Bol. This is a more complex arrangement than that deployed by high street and other
banks whose ATMs are seamlessly connected to their own computer systems. cA
One notable problem, reported by several Applicants using Bol ATMs, seems to relate to the
manual (rather than electronic/automatic) extraction and use of the 'cash dispensed figures
from the 'Bank Totals' receipt that Subpostmasters were required to obtain each day from their
ATM and the daily input of ‘cash declarations’ into Horizon. This problem is sometimes referred
to as "problems with the ‘air gap' between the ATM and the Horizon system".
As a result of the problems that the 'air-gap' was causing, the Post Office in February 2008,
issued an ‘Operations Manual interim’. Post Office stated that it was issuing new instructions cA
because a number of non-conformance issues are still affecting the processes for ATM
reconciliation and settlement and to explain the correct end to end accounting processes
relating to Bank of Ireland ATMs.
The Introduction to the Operations Manual interim stated:
The Bank of Ireland, via the LiNK network, extracts a 16:30 -16:30 ‘cash dispensed’ figure
automatically from your ATM each day. This figure forms the basis of a settlement to Post
Office. This figure is the value of cash dispensed from your ATM from 16:30 the previous day
until 16:30 on the current working day." In other words, the amount of cash dispensed to
customers, from each branch's ATM during the previous 24 hours (or during the previous
72hrs between Friday at 16:30 hrs and Monday at 16:30 hrs), would be available to Bol and
that data would be extracted by Bol from each ATM.
The Operations Manual interim goes on to say:
Page 6
POL00006553
POLO0006553
Page: 6
“Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:38:25 +01'00"
Need to quantify what is meant by a “large” surplus? Who makes the assessment as to what is a large loss / surplus?
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:56:31 +01'00"
This summary description of the process is deficient and requires much more detail.
“Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 14:56:03 +01'00"
Where is the evidence for this opinion about other companies use of ATMs?
Can we get BOI to comment on this?
“Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:39:28 +01'00"
Where was this statement made by POL(cross reference required)?
POL00006553
POLO0006553
In order to meet the required business accounting standard, branches are required to obtain
each day the 16:30 - 16:30 ‘cash dispensed’ figure from the ‘Bank Totals’ receipt which is
available from the Bank of Ireland ATM, and to enter this figure on the Horizon system ona
daily basis"... The Manual later describes that as needing to be done each day "after 16:30
but before 19:00 hrs...
The Manual continues:
In Product and Branch Accounting (P&BA) a comparison is made between the LiNK generated
figure and the figure you enter on Horizon. If the totals differ, they are queried with Bank of
Ireland and may result in a Transaction Correction sent to your branch. If you do not enter
the daily 16:30 - 16:30 ‘cash dispensed’ figure on Horizon, this means that the settlement
figure by Bank of Ireland cannot be confirmed. In this case the two sets of figures are
automatically reported as differing, resulting in reconciliation problems.
3.9. In addition to obtaining the cash dispensed figures from their ATM and entering it into Horizon
at the right time of day, Subpostmasters were also instructed to make a daily cash declaration
(and do this every day including on days when the branch closed before 16:30 hrs) into their
Horizon terminal:
You must make a daily cash declaration on the Horizon system for the separate stock unit
you have set up for ATM transactions (including days when you close before 4.30pm (16:30
hours) and you have logged on to the ATM stock unit). Unlike cash declarations for your
counter stocks, however, you do not need to make a physical count of the cash contained in
the ATM in order to complete the declaration.
You must make the declaration before 7pm (19:00 hrs) and you must include all funds stored
in your official safe that you have received on a Remittance specifically for your ATM.
3.10. It would appear that some Subpostmasters either misunderstood the complex instructions
or, were told by Helpline staff that the problem would sort itself out (though.it did not) and
subsequently found that the Helpline advice was later countermanded.I
nal A consequence of getting things wrong with the ATM cash dispensed figures was that an out
Cy one situation developed where the branch's ATM would be expected (by Bol and by Post
Office) to have an amount of cash in its cassettes that was sometimes widely different from the
rue cash figure that the Subpostmaster had entered into Horizon. cA
This out of sync situation became, it seems, commonplace in some branches prior to the
‘ebruary 2008 release of the Manual Update. Indeed, the Manual says:
If following the instructions contained in this workaid means that the way you will now enter
data on Horizon and balance your ATM cash will change (for example, if you have previously
entered figures which are not based upon the 16:30 - 16:30 figures or if you have not
completed this task daily, moving to the correct process is likely to result in a cash balancing
difference).
Page 7
POL00006553
POLO0006553
Page: 7
sp Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 15:13:29 +01'00"
Why are these instructions complex? What is unclear? Where is the rational and evidence for this conclusion? To what extent, has SS taken into
account the 1000s of SPMRs who have not encountered problems with ATMs.
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:40:39 +01'00'
Where is the evidence for the statements about helplines being unhelpful? Is this based on only SPMR’s submissions only or on fully investigated
cases.
Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:41:08 +01'00"
What does "getting things wrong” mean? This fails to state that the person “getting things" wrong is the SPMR.
Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:41:49 +01'00"
What is an “out of sync" situation? This needs to be described in much more detail.
Number: 5 Author: ap6 Subject; Sticky Note Date: 31/03/2014 16:42:18 +01'00"
The “true” cash figure will always be the one in the cassettes and never the one on Horizon, not the other way around,
Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:42:50 +01'00"
Is this conclusion correct? Even if the SPMR wrongly accounts on Horizon a TC would bring the amount of cash in the accounts into line with the
cash on hand.
@ Number: 7 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:43:05 +01'00"
Where is the evidence to support the statement that this issue was “commonplace”. This conclusion cannot be drawn from the quoted
statement below.
POL00006553
POLO0006553
If this is the case, P&BA will issue a Transaction Correction, to address the cash balancing
differences, and will try to provide clear evidence and as much information as possible to
help with correcting transactions. The correction assumes that all previous ATM dispensed
figures have been recorded on Horizon accurately and that branch cash has been correctly
declared.
.13. As further illustrations of the sheer complexity of the February 2008 instructions, the
following extracts shows how easy it must have been to make mistakes, even after the new
instructions were released: fel
From the paragraph titled Loading cash into the ATM:
Always enter in the ATM the number of notes loaded in the machine, not the value
Ensure that you enter the number of notes you are loading, not the amount already in
the ATM
Please remember: At the weekly balance all figures are cleared. Therefore, you will
need to enter all amounts in total when you reload the machine next.
.14. The following extract is from the paragraphs dealing with Weekly balancing and recording
figures on the Cash Management Sheet:
You must make a physical count of the cash in your ATM at least once a week and record the
figures on the Cash Management Sheet before removing the cassettes for your physical
check of the cash. You must not enter any of the figures on the Horizon system. The weekly
balance can be carried out on any day of the week, even at the end of a Branch Trading
period as long as your premises are closed to the public. It should be completed at any time
after 16:30 hrs when the Disp 16:30 — 16:30 figure has been entered.
Please note: You do not have to reconcile the cash in your ATM with the cash declaration you
make on Horizon. The ATM is balanced using the Cash Management Sheet as described
below. If the Cash Management Sheet balances, your ATM has balanced.
... and the following extract is from the paragraphs dealing with /f the Cash Management
Sheet balances, but there is a discrepancy on Horizon:
The Horizon system should not be recording a discrepancy in the ATM stock. If a discrepancy
is not rectified, it will give you a wrong carried forward figure and the problem could be
compounded, If there is a discrepancy on Horizon but the Cash Management Sheet balances,
you could have entered incorrect figures on the Horizon system.
Go back through your receipts and double check that the 16.30-16.30 ‘cash
dispensed’ figures for each day have been entered correctly on Horizon
Check that any ATM cash originally remitted into a counter stock has been
transferred into the ATM stock
Check that the transfer into the ATM stock has been accepted
Page 8
POL00006553
POLO0006553
Page: 8
“gp Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 15:23:44 +01'00'
Emotive language not required. What is the rational behind the conclusion that the instructions were complex.
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:46:21 +01'00"
This section leaps from reconciling ATM transactions on Horizon (above) to loading the ATMs (below). These are two separate issues and do not
relate to one another.
@ Number: 3 Author: ap6. Subject: Sticky Note Date: 31/03/2014 16:45:05 +01'00'
These mistakes were made by the SPMR but the report does not make this clear.
Also, what is the justification for saying that these mistakes were "easy" to make?
In any event, why is POL responsible for these mistakes and, if so, what are SS proposing that POL failed to do?
Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:46:41 +01'00"
What is the relevance of this section? SS do not comment on it.
POL00006553
POLO0006553
Double check that the daily cash declaration has been completed accurately
If you cannot resolve the discrepancy, do not phone the Wincor Helpdesk; please
phone the NBSC for advice. lon
3.15. The Subpostmasters, in virtually every case that we have examined, state that they had nok
idea what was causing the out of sync situation. Of potential significance is whether the
roblems reported occurred before or after the February 2008 Manual update and also
whether the branch was operating ATMs after the 16:30 hrs Bol ‘cut-off time during the week
ind whether the ATM was also in use at weekends, since this would require more complex
= lara entries on Mondays between 16:30 and 19:00 hrs. These entries should include all
cash dispensed in the preceding 72 hrs between 16:31 hrs on the previous Friday afternoon and
16:30 hrs on that Monday afternoon.
3.16. We have also been told that when ATM problems were reported to the Helpline,
ubpostmasters were often told to ignore the shortfall because it will sort itself out. This advice
runs the risk of allowing a large shortfall to build up, possibly in excess of £100,000, rather that
ling with the underlying problem. Inadequate and possibly inappropriate advice,
icularly prior to the 2008 Manual update, appears to have been routinely provided which
ray bavel uted a Subpotstrs coming Under PSST yachts part of
temporary solution to the as yet unresolved problem.
3.17. It is also possible that some of the large discrepancies reported could also include losses due
to external theft using sophisticated methodologies such as retract fraud. The risk and
consequences of this does not seem to have been appreciated by Post Office until quite
recently.
3.18. Enquiries on this matter are continuing.
Page 9
POL00006553
POLO0006553
Page: 9
Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:47:19 +01'00'
Not every case - just the 20 that raise ATM issues. This needs to be made clear.
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 15:27:26 +01'00"
Does this not show that the SPMRs were negligent and at fault?
Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:48:23 +01'00"
Why does the timing of the problems have any bearing? SS have not described any of the processes before 2008 as they only quote from the
2008 manual.
“@ Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:49:06 +01'00'
Why does it make a difference that the ATM continues to operate after 16:30? The report shows the previous days trading so it does not matter
if the ATM continues to operate at 16:30.
Number: 5 Author: ap6 Subject; Sticky Note Date: 31/03/2014 16:49:36 +01'00"
Why would the accounting be more complex over a weekend? It's the same process just for multiple days.
Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:51:31 +01'00"
What "ATM problems” are being referred to?
@ Number: 7 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:50:58 +01'00"
Where is the evidence for this? In how many cases, have SS received this report about the response from the helpline?
= Number: & Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:52:27 +01'00'
Why would this cause a shortfall to build up? Incorrect accounting would cause an error in the accounts but no loss cash as the unaccounted for
cash will still be in the branch / ATM.
Number: 9 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:53:47 +01'00'
What evidence is there that advice was “inadequate and inappropriate"? What is the justification for saying that this advice was “routinely”
wrong.
=) Number: 10 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:53:18 +01'00"
Why is this problem worse before 2008?
im Number: 11 Author: ap6 Subject: Highlight Date: 31/03/2014 16:55:44 +01'00"
Number: 12 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:55:21 +01'00'
Are SS saying that subpostmasters are justified in committing a criminal offence?
This statement is highly dangerous and may have affect the safety of convictions. We would need CK's view.
“Number: 13 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:56:23 +01'00"
This para completely ignores POL's note on ATM retracts which refutes this issue entirely.
POL00006553
POLO0006553
4. National Lottery
4.1. Not all branches sell Lottery tickets or Lottery Scratch Cards. Where these items are sold, they
are usually sold from the retail counter, not the Post Office counter, even though they have to
be accounted for using the Horizon terminal at the Post Office counter.
4.2. There is often a significant discrepancy between the trading hours of the retail shop counter
compared with the Post Office counter. The retail counter will therefore be selling Lottery on
tickets/scratch cards outside the hours where the Horizon system is operating at the Post Office
counter. Since branches are not allowed to sell National Lottery products other than through
Post Office, all ticket sales have to be recorded, each day, into Horizon. Also, before any Lottery
products can be sold, the pack of Lottery products must be ‘Activated’ on the Camelot terminal
and then 'Remmed in' to Horizon.
4.3. We have received many reports where Subpostmasters have stated that their branch's Horizon
yystem would get 'out-of-sync' with the quite separate Camelot system, thereby generating
material surpluses or deficiencies that are eventually corrected by Post Office issuing
ransaction Corrections (“TCs”) through the Horizon system. The average Lottery-related TC
was approximately £650 and many of these TCs were for amounts that were exactly divisible by
£160, that being the value of a full pack of Scratch Cards.
4.4. These problems appear to have been most serious and frequent between 2005 and February cA
2010, when Post Office made a significant change to its standard operating procedures that
made it impossible, after that date, to have packs of inactive Scratch Cards recorded in Horizon
F. the same time as in the Camelot system. A further important improvement was made in
February 2012 when Post Office introduced a system change that finally eliminated the
possibility of synchronisation errors between the Horizon and Camelot systems.
4.5. We have also been told that before these important system improvements were introduced,
inconsistent and sometime conflicting advice was provided by the Helpline which further
exacerbated the problem.
4.6. The out-of-sync problem was particularly relevant in branches where the retail shop sold
Lottery tickets late into the evening, long after the Post Office counter had closed. A further
complication often occurred on a Wednesday evening that was the end of the weekly Trading
Period. Subpostmasters were required to reconcile the Horizon/Camelot figures first thing on a
Thursday morning, rather than at 17:30 hrs on the Wednesday, but this requirement was not
always advised by the Helpline. It is not clear whether the training that Subpostmasters
received covered this important point.
4.7. A specific example of the Camelot/Horizon synchronisation issue is described in Appendix 4 to
2nd Sight's Interim Report dated 8th July 2013 and this provides further important information
about this matter.
4,8. Enquiries on this matter are continuing.
Page 10
POL00006553
POLO0006553
Page: 10
sp Number: 1 Author: ap6. Subject; Sticky Note Date: 31/03/2014 16:57:48 +01'00"
SPMRs are not required to sell Lottery products outside of counter hours - that is their choice. Need to confirm this with AVDB.
Number: 2 Author: ap6 Subject; Sticky Note Date: 31/03/2014 16:58:30 +01'00"
AVDB to confirm whether these process descriptions are correct.
@ Number: 3 Author: ap6 Subject; Sticky Note Date: 31/03/2014 16:59:06 +01'00"
Need to explain what is meant by “out of sync".
Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 16:59:45 +01'00"
Where do these statistics come from?
i Number: 5 Author: ap6 Subject; Sticky Note Date: 31/03/2014 17:02:24 +01'00"
The first sentence makes no sense. Is this trying to say that the “significant change” caused the problems between 2005 and 2010?
If not, what did cause these problems?
If so, why was the change "significant" and why did it cause these problems?
Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 17:00:45 +01'00"
Need to check whether this para is factually correct.
> Number: 7 Author: ap6 Subject: Sticky Note Date: 31/03/2014 17:04:08 +01'00"
More detail needed - what information is SS relying on? Who told them this? How have they assessed whether this anecdotal evidence is
reflective of the wider SPMR community? Why was the advice "inconsistent" and "conflicting"?
Number: 8 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:03:11 +01'00"
POL to confirm whether this is factually correct.
Need to clarify what is the “complication” and why is it a “complication”?
Number: 9 Author: ap6. Subject: Sticky Note Date: 31/03/2014 20:03:47 +01'00'
Why is accounting on a Thurs morning more difficult than Wed evening?
POL00006553
POLO0006553
5. Limitations in the Transactional ‘Audit Trail’ ch
5.1. Over 30 Applicants have claimed that they were unable to determine the root causes of
discrepancies (both shortfalls and surpluses) reported by Horizon, because the underlying
transaction data was not made available to them.
5,2. The concerns fall broadly into two areas:
a) data that isn't available even on the day of the transaction; and
b) data that was only available for 42 days after a transaction occurred (later increased to
60 days following a system change by Post Office).
Data that isn't available even on the day of the transaction
5.3. Applicants' concerns principally relate to transaction types where Horizon produces, at the end
of day, only an aggregate amount and a volume for that day's transactions e.g.:
Transactions: 35, Value: £17,112.
Bis.a. This occurs, for example, where customers have paid for goods and services by Debit or Credit
Card.
5.5. In the event of an end-of-day discrepancy for this transaction type, and without the benefit of a
disaggregation of a total amount into its constituent transactional components, Subpostmasters
will find it difficult, if not impossible, to identify the individual transaction(s) that brought about
the discrepancy.
5.6. Typically, a Subpostmaster will need to find items:
a) that should be, but are not included in the aggregate total; or
b) amounts that have been incorrectly entered such as £50.00 entered as £500.00,
£39.00 entered as £93.00, etc.; or
c) amounts that form part of the aggregate total, but should not be included in that total
atall.
5.7. Only by finding those errors and omissions can the Subpostmaster begin the process of
correction and loss mitigation. That may sometimes involve contacting the relevant customer
but in order to do that, he needs not only to identify the incorrect or missing transaction, but
also know the name, and perhaps also the address, of the relevant customer.
on 5.8. Many Subpostmasters have told us that prior to the introduction of Horizon it was easy to do
this since the paper dockets retained to evidence each transaction provided this information, It
is regrettable that the Horizon system does not provide the same functionality as the previous
manual system.
Page 11
POLO00006553
POLO0006553
Page: 11
sp Number: 1 Author: ap6. Subject; Sticky Note Date: 31/03/2014 20:11:27 +01'00"
This section overlooks the fundamental point that this problem begins with an error by the SPMR and should reflect this point in this analysis,
op Number: 2 Author: ap6 Subject; Sticky Note Date: 31/03/2014 20:09:01 +01'00"
This is a new point that I dont believe POL has seen before.
@ Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:08:40 +01'00"
is this correct? Payment by a credit / debit card is not a transaction type so this appears inaccurate.
No context is given - how many transactions of this type exist and what proportionate does these make up of all transactions.
Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:09:49 +01'00"
This section is useful as it reflects the errors section in the factfile and justifies the inclusion of that info in the factfile.
Number: 5 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:13:32 +01'00"
Need to quantify “many subpostmasters” and put in context of the total number of SPMRs. Also, needs to explain how SS has tested the veracity
of the reports from SPMRs and tested the veracity of these statements.
i Number: 6 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:14:49 +01'00"
This conclusion appears to be based on anecdotal evidence from SPMRs only. SS needs to properly describe the paper docketing process in
order to compare this to the system on Horizon in order to determine if one systems is better than the other.
POL00006553
POLO0006553
$3.
Data that was at first available, but after 42 days (later extended by Post Office to 60 days) is
no longer available
The main concern expressed about data availability is the need to go back to a previous period
when delayed Transaction Corrections (“TCs”) are issued by Post Office. If the delay in issuing
the TC exceeds 42 days (now 60 days), the Subpostmaster has little choice other than to accept
the TC. Requests for supporting evidence that would enable the substance of the TC to be
validated were routinely rejected by Post Office, usually on cost grounds. fost
Page 12
POL00006553
POLO0006553
Page: 12
“gp Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:16:38 +01'00'
This overlooks the fact that in a large number of cases, SPMRs are required to keep papers records for a number of transactions by printing off
receipts at the end of each day. SS therefore needs to assess the merits of this point before drawing any conclusion
@ Number: 2: Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:17:34 +01'00"
The statement that requests for data were routinely rejected needs to be evidenced. In particular, the comment that the rejection occurs on
costs grounds needs justification.
POL00006553
POLO0006553
6. Transactions not entered by the Subpostmaster or their staff cF
en 6.1. Many Applicants have reported that Horizon transactions have been entered, or cash or stock
balances changed, when the branch was closed and no one had access to any of the Horizon
terminals. Evidence has also been provided of transactions apparently occurring after a
Subpostmaster was suspend ind had no access to the relevant systems. Enquiries on these
matters are continuing.
6.2. Post Office's position on this is that it does not, cannot and never has input transactions (or
journal entries or Transaction Corrections) that impact branches. However, we are aware that
certain error recovery and correction processes can result in transaction reversals that carry the
System Identities ('IDs") of the branch employee who entered the originating transaction that
the system itself is automatically reversing (see Section XXX ‘Automatic Transaction Reversals’).
6.3. Enquiries on this matter are continuing.
Page 13
POL00006553
POLO0006553
Page: 13
“Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:24:40 +01'00"
Regardless of whether ghost transactions exist or not, SS needs to show that they would have a negative impact on SPMRs.
“Number: 2 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:21:52 +01'00"
The anecdotal evidence from SPMRs needs to be explained, quantified and tested for veracity.
Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:22:19 +01'00"
SS refer to evidence so this evidence needs to be set out in full.
“Number: 4 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:23:48 +01'00'
It is quite possible for transactions to occur after a SPMR is suspended / terminated because TCs may occur after these events. SS therefore
needs to distinguish between these valid transactions and the allegation they are making here.
Number: 5 Author: ap6 Subject; Sticky Note Date: 31/03/2014 20:26:21 +01'00"
Need to explain the reversal process in more detail and, critically, why this process actually causes a loss to SPMRs.
POL00006553
POLO0006553
7. Automatic Transaction Reversals
7.1. As mentioned in Section XXX a number of Applicants have reported transactions that appear to
have been input when the branch was shut and no one had access to the Horizon terminals.
sy
We briefly dealt
Interim Report (see Spot Review 01). In that example, the Horizon system had automatically
reversed a transaction which was only partially completed. Although the Subpostmaster had
entered the original transaction, he had not entered the reversal of that transaction. Rather,
the Horizon system had automatically generated a transactional reversal after suffering a
telecommunications interruption.
7.3. The transaction identity assigned by Horizon to that reversal was that of the Subpostmaster,
rather than a system-generated ID. We consider this to be inappropriate as it fails to
differentiate between entries genuinely made by a User and those that are system generated.
7.4. This misuse of User IDs for system generated transaction reversals appears to be inconsistent
with various assurances and evidence provided by Post Office and further enquiries are
continuing.
Ars. This matter was also highlighted in a report by Helen Rose, Post Office Security - Fraud Analyst -
dated 12 June, 2013:
"... itis just that I don't think that some of the system based correction and adjustment
transactions are clear to us on either credence or ARQ logs."...
"However, my concerns are that we cannot clearly see what has happened on the data
available to us and this in itself may be misinterpreted when giving evidence and using the
same data for prosecutions."
7.6. N.B. ‘Credence’ is a Post Office Management Information Reporting System and 'ARQ logs’ is a
reference to a request for Horizon information archived through the ‘Audit Retrieval Query’
process.
7.7. Enquiries on this matter are continuing.
Page 14
Page: 14
POL00006553
POLO0006553
Number: 1 Author: ap6 Subject; Sticky Note Date: 31/03/2014 20:28:19 +01'00'
This first sentence is very dangerous, SS needs to clearly set out the evidence and analysis behind its conclusion.
This statement could undermine the safety of convictions - need CK input here.
ip Number: 2 Author: ap6 Subject: Highlight Date: 31/03/2014 20:38:09 +01'00"
Number: 3 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:28:59 +01'00"
Again, SS need to offer a view on whether this process is incorrect. If so, they need to state that view with supporting reasons,
i Number: 4 Author: ap6. Subject: Sticky Note Date: 31/03/2014 20:35:11 +01'00'
Need to justify why they consider this inappropriate and why this would cause losses to SPMRs.
@ Number: 5 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:35:55 +01'00"
Need to explain the relevance of the quote passage below to this issue.
POL00006553
POLO0006553
8. Cash and Stock Remittances ('REMs') in and out of the branch oo
8.1.
8.2.
8.3.
8.4.
8.5.
More than 25 Applicants have raised issues concerning REMs.
'REMs' are inward and outward remittances of stock and cash. Large amounts of cash and stock
are routinely sent to and from branches using this system. Robust procedures are in place to
ensure that the process normally operates reliably and that errors are rapidly detected.
Occasionally branches will report that a REM package has not been received or that it contains
fewer items, or lower value, than the sender claims. Post Office deals with these discrepancies
by issuing ‘Transaction Corrections’ (TCs) that show the details of the shortfall or overage.
Because such discrepancies relate to physical items it is necessary to rely on witness statements
and other documentary evidence as to the exact content of REM packages.
Some Applicants have described instances of Foreign Currency shipments being accidentally
sent to the wrong branch. We are aware that some of these errors have occurred due to Post
Office's Business Partner for Foreign Currency (‘First Rate’) using an incorrect delivery address.
Enquiries on this matter are continuing.
Page 15
POL00006553
POLO0006553
Page: 15
op Number: 1 Author: ap6 Subject: Sticky Note Date: 31/03/2014 20:37:40 +01'00'
This section does not highlight any discrepancy that cannot be resolved by a TC in the manner described by SS.