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Post Office
“Lessons Learned” Review of handling of alleged issues/concerns about Horizon: Terms of
Reference
Background
Over recent years there have been a number of claims that weaknesses in the Horizon IT system
were the real cause of accounting discrepancies attributed to a number of sub-postmasters.
Following a suggestion from Mr James Arbuthnot MP(JA), Second Sight (SS) were commissioned to
undertake an independent investigation of the Horizon system and an interim report was published
in July 2013. The Second Sight investigation continues. The Post Office has also commissioned other
specific follow-on work in the light of the Second Sight interim report. Those involved ie., the Post
Office and other stakeholders - JA, Justice for SubPostmasters (JFSA), SS - confirm they are now
working in a constructive and collaborative way to put in place a mediation approach to resolving
any disputes. This had not been the case leading up to the Second Sight interim report.
Purpose
This is a “lessons learned” review. The purpose of this review is to not to duplicate the work already
done or under way; nor is it intended to investigate individual cases. Rather it is an internal review to
see a) whether there are any lessons to be learned by the Post Office about how it handled the work
leading up to the Second Sight interim report, in relation to process, governance and stakeholder
engagement; and b) to highlight any cultural observations, which could be of use as the business
continues its transformation to more mutual ways of working.
This "lessons learned" review has been commissioned by Paula Vennells (Post Office Chief Executive)
with a particular emphasis on three questions:
1) what if anything could the Post Office have done differently, so that the PO and its
stakeholders (JA, JFSA, SS) could have worked collaboratively and constructively from the
beginning?
2) the business has changed the way it is running the review, does it now reflect good practice
(ie “lessons learnt”)/where are the gaps?
3) what broader cultural lessons can be learned?
Scope
The review to start from JA raising his concerns.
Review how the investigation was established and run, following a suggestion from JA that
there should be an independent review. This should cover:
a. the circumstances and reasoning behind the decision to commission an investigation;
b. the nature of the investigation process adopted — accountabilities, purpose/scope,
methodology, output, contractor selection, timescale, costs etc.
the Post Office management of and interface with the ongoing investigation
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d. the Post Office management of external and internal stakeholders during the
investigation, including (but not limited to) - SS, JFSA, JA, NFSP, the media and the
Post Office Board
3. In the light of the findings from the above work, the Review should identify lessons
learned and make recommendations to the Chief Executive covering in particular:
a. any further immediate actions which could be taken to help finalise the current
Horizon review and related work streams;
b, the handling of any similar investigations of alleged weaknesses in Post Office systems
or procedures in the future;
c. stakeholder management.
4. Finally, consider any wider implications for the Post Office, including in relation to its
culture, management and processes.
Methodology
Although not secret, the Review has been commissioned as an internal “lessons learned" for the
Chief Executive to discuss with the Post Office Board. The Board may need in due course to consider
whether it wishes to make the report or its findings more widely available in whole or in part. It is
not expected that this review will undertake new investigatory work. It will review existing
evidence, including in particular, the findings of Second Sight and will interview mainly Post Office
players and if they are willing, 2/3 key external stakeholders who were directly involved.
The Review will be conducted by an external assessor Richard Hatfield working to Paula Vennells,
Chief Executive. The review should be considered part of the wider Post Office response to the
Second Sight report. [Alasdair Marnoch, Chairman of the Audit Committee will work with Richard
and Paula in support of the project]. The external assessor will be supported by Malcolm Zack,
Head of Internal Audit and Alwen Lyons, Company Secretary who will facilitate access to documents
and people.
Outputs and Timescales
The external assessor will submit a proposed broad workplan for agreement before starting
substantial work. Richard Hatfield (RH) and Paula Vennells will touch base weekly but RH should
consult immediately if he considers any changes may be required to the scope or duration of the
work. It is estimated that the task, including preparatory research and writing up, will require 20
days in total. Assuming that substantive work can begin in early September, work is to be
concluded and a final report submitted by end October.
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PO LESSONS LEARNED REVIEW APPENDIX 1 - GROUND TO BE COVERED
“Second Sight” Review - main focus of the "lessons learned” report
Precursors and original objectives
* Selection/Commissioning Process
e TORS
* Management and monitoring of contract/inquiry
Events surrounding second MP meeting, when PO was not present and interim report.
Were the purpose and priorities clear to the PO at the outset? Were these understood/agreed by
other parties? Were the skills/resources needed correctly identified? Were these reflected in
selection of SS and the direction they were given? To whom was the Review accountable (and
what was the actual/intended relationship with the JFSA)? Was this clear to SS and others
involved? What were the expected timescale and outputs? Did SS share any form of workplan?
Were there any deliberate changes to scope or timing? Were there any formal waypoints or
routine monitoring of progress, timescales and budgets. Any concerns inside PO, by SS, or external
bodies about progress? If so, what action taken. Perceptions of the second MP meeting and of the
interim report. How were communications/ expectations managed: the Executive, Board, BIS,
NFSP?
Perceptions and perspective
In addition to establishing and assessing, so far as possible, what actually happened, it will be
important to understand how things were perceived at different times from the point of view of
particular players.
People to be interviewed
Alwen Lyons, Susan Crichton, Simon Baker (if available), Angela van den Bogerd, Paula Vennells,
Martin Edwards, Lesley Sewell, Kevin Gilliland, Alice Perkins, Mark Davies, Ron Warmington (SS), lan
?? (SS)
Thc: Rod Ismay, John Scott, Craig Tuthill, Lin Norbury, John Breedon, Alan Bates (JFSA), Donald
Brydon (RMG) and others as identified/requested through the review process
Background — preparation for the report only
@ PO organisation - emphasis on the Network and its support structures; eg., interfaces
between NBSC, Field teams, Audit/Training, Security, Legal
e =SPMs
e Horizon
Standard prosecution/debt recovery processes
¢ Outline chronology
Establish basic understanding of PO organisation and identify potentially relevant responsibilities.
How does the relationship with SPMs work? What is the function(s) of Horizon? When it was
developed/introduced — were there problems? Who is responsible for a) day to day operation b) the
system c) overall integrity of process.
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Establish outline chronology of relevant events in order to arrange and structure initial interviews.
Identify individuals in relevant roles at particular times. Ensure that issues are addressed in their
right context.
Early Indicators? - preparation for the report only {ie not to be reported on)
¢ Complaints about Horizon?
© Pattern of suspected fraud
@ Why management were so sure that Horizon was not failing
© Broader complaints (balancing accounts; change of branch processes)
When were the first complaints/allegations about problems with Horizon balances? Were there
other known issues/complaint about Horizon? Was there any evidence that PO managers realised
the issues were wider than the Horizon system, eg., inadequate support, training, follow up.Were
there any changes in the incidence of suspected fraud or more generally of accounting problems
following introduction of Horizon. If so, what was done about them. (NB Need to consider
processes and useability as well as the IT itself)
External Concerns & Responses - preparation for report and/ or identification of wider cultural
observations
¢ Individual SPMs
« James Arbuthnot MP
e JFSA
© Second Sight
° Media
Establish when and in what circumstances external sources raised potential concerns. How were
these logged and dealt with? Were concerns raised by SPMs who were not subject to potential
action for recovery? How were complainants handled, what consideration was given to these
issues, outcome and feedback on any investigations. Were any issues successfully resolved?
What consideration was given to the implications for cases where prosecution or debt recovery
action was pending? Were any wider issues identified e.g. in relation to training in the use of
Horizon or the relationship between the PO, for Horizon or SPMs more generally. What
difference did the involvement of James Arbuthnot MP and the JFSA make? How were these
intermediaries handled? How were wider implications for the business handled — e.g. relations
with SPM community (NFSP), media and reputational issues?
Accountabilities
e For Horizon system
© For balancing SPM accounts
For prosecution process
e For response to concerns
© For Second Sight
Establish specific responsibilities and accountabilities in relation to each of the above.elements ...
and how these related to each other. How were cross cutting issues coordinated/controlled?