POL00045790
POL00045790
Bane
Between
Regina
aud
Carl Adrian Page Defendant
Report to the Court prepared by
T Taylor, a Director in KPMG LLP
KPMG LLP
7 apal 2006
This report contains 22 pages
Wjn/069
Pana
Report te the Court by T Taylor. a Director in KPMG LLP
Stricily private & confidential
Tedgaril 2008
Contents
i Introduction 4
Terms of reference 3
4.2 Qualificutions 3
1.3 Sources of information 4
2 Background 5
2.4. ‘Summary of Prosecution case 5
3 Post Office accounting systems and procedures 6
31 Accounting procedures.- Horizon 6
3.2 Bureaa de change.and Forde Moneychanger system 7
4 General 10
4. Information considered in my report 10
5 Calculation of the alleged theft 12
5.1 Backgiound 12
$2 Summary of alleged theft 14 January 2003 audit report 12
5.3 ‘Inflation’ of the ‘Foreign Curvency Storling Equivalent’ figure in
Horizon 2
5.4 How was the alleged theft concealed? 13
5.5 Audit process 14
5.6 Audit of 27 June 2002 15
5.7 *Errors” pre-January 2003 audit W
$83 Matters where J an unuble t- comment further 19
6 Summary and conclusions 20
6.1 My overall conclusions 2
pies t
POL00045790
POL00045790
Peport to the Coit by T Taylor, a Director in KPMU LL
Stricily poyaw: & cont
Glossary of terms used in my report
A§physe
Horizon — the automated system used to record transactions in. the pust office.
‘BCV' — Bateh-Control Vousher used to record the number. date and value of
cheques to be despatched to ‘Data Central’ (clearing centre) in Londoa.
Stork unit — 2 unt crested on the Horizon sysiein to which cash and stack is
asgigned,
‘AM? stock unit — the stuck unit at the post office where bulk cash (including
foreign currency) and stock was recorded in Hortzen.
“BU stock unit ~ the bureau stock unit at the pest office where forciga currency
transa¢lions and balances wer recorded in Horizon,
Balance: ‘snapshot" — a report showing the level of cash and sivels held in a unit
and the receipts and payments made at a given point in time duriag the eurrent
period,
Cash Account ~ the statement of cash, stock and ‘transactions produced by the
Horizon system ut the end of an eecounting period.
‘ONCH’ - Quernight Cash Holding figure recorded in Horizon representing the
total amount af casa (sterling) held at the end ef cach working doy.
‘Rematiance’ ~ the movement of cash and stotk between post offives and the post
office distribution centre.
“Command 3° printovt — daily printout from the Forde Meneychanger whieh
includes the transaction summaries of the day and a closing. balance for each
currency.
“Cerimand 10° printout — weekly printout fom the Forde Moneychanger which
includes a value of foreign currency held and che bureau de change revaluation
and commission toials for the week
Stock ~ includes postage stamps, maior velnele licences, Postal Orders, ete.
w
POL00045790
POL00045790
4a.
123
124
mana
Repuit to the Cowt by T Taylor. y Diector i KPMG LLP
Strictly pasate & coafidentiat
Padprd 2005
Introduction
Terms of reference
I have been instructed by Frisby & Co, Solicitors. to prepare an expert accountancy report
for possible use in the forthecming tral of Mr Carl Adrian Page (“Mr Page"),
Mr Tage was the sub-postmaster at Rugeley Post Office and as bean chatged wiih the
theft of £282,000 in, sterling fiom Post Office Limited between March 20U2 and January
2003.
hays been specifically asked to consider the theit charge agaist. Mr Poye and tie
accpuntiny evidence put iorwatd by the Prosecution,
Qualifications
Lara ‘Timothy Taylor. 4 Fellow of the Institute of Chartered Accountants in Eagland and
Wales and I have a Master's Degree in Accounting and Finance. My business address 1s
1 The Embankmeni, Neville Street, Leeds. LS] 4DW. [ama Member of The Avademy
of Experts and of the Expert Witness Institute. { jomed what is now EPMG LLP
KPMG") in 1972 and became & partner in 1983,
Since qualification I bave been exiensively involved in audit and accountancy work and
in the preparation of reports, I retived as a partner in 2002 and now continue with KPMG
as. a Director, specialising in expert. witness add dispute resolution services. I have
prepared numerous reports. giving fy expert opinion in both cial utd criminal matters.
atid. Ihave given evidenes at trial on many-oceasions.
In preparing ihis ‘report I have" had assistance from Jason Pate. 3 Schior Marager ‘in
KPMG who fs a Meniber of the Institute of Chartered Aveeuntants 1p England and Wales.
Jason hus worked under my supervision and the opinions expressed in this report are my
owt.
{ report in this matter as an expert witiess and not 4 witness of fact, and J have relied
upon the information provided to me, Hany further information comes to hight or any
poy 3
POL00045790
POL00045790
125
13
13.1
Report to the Court by T Taylor eDacctor m KPMG LLP
Saricily private & confidential
F apett 2006
information which I have selied upon proves. to be incorrect, 1] may. wish io change my’
conclusions,
This report is strictly private and confidential. {1 has been prepared solely in relaron to
the forthcoming trial of Mr Page and is produced on the undersiandiny thar it is not to be
communicated to any third party, ih whede or in part. other than in connection with these
legal proveedings
Sources of information
This report is based en a consideration of releyatt witness stetementa and exhibits
provided {6 nie by my instructing solicitors.
Details-are summansed in Section 4 below,
fjp/iae 4
POL00045790
POL00045790
2.1
2M
2.45
Ropartta tos Cows by T Taylor, a Direciar it KPMGLILP
Strictly private & confidential
2 April U6
Background
Summary of Prosecution case
‘The theit charge against Mr Paye relates to a cash amount of £282.000 suid to be missing
from Rugeley. Post Office which was identified following an audit (see Section 5.5) at
Rugeley Post Office on 14 Janunry.2003,
‘The Prosecution’s Gpesing Note dated 2 October.2005 states that the indictment period
for the alleged thefts {rom March 2002 to January’ 2003 andthe amount allegedly stolen
hy Mr Page was €282.006 in sterling
Hewever, m the Royal Masl’s Jetter my inetructing soliciters dated 23 February 2100 it
is stated that the alleged theft “could Auwe begin ai any stage after Mr Pege tack over
at Rugeler",
The Frosecution further note in the same letter that (here are“... digffendties in assessing
the trite position of the cash / stock held whee mauipulated accounts are presented”.
Notwithstanding the above. I pote that the Prosecution have not provided any Weekly
Cash Accounts ov related cweountiag documentation for the period privr to March 2002,
and. as suoh [have not been uble to consider any such evidence prior tu the period of the
indictment
WAM $
POL00045790
POL00045790
342
BAS
B14
316
Report én ihe Coun by 'f Taylor a Dirsetor in KPMG LLP
Strietly private & confidential
2 Agel 2006
Post Office accounting systems and procedures
Accounting procedures ~ Horizen
Lhave set out below certain details of the Post Office accounting systems and procedures
that were in place during the indicument period, This understanding is based on a review
of a number of Past Office operation manuals and user guides provided to.me: details. of
which have heen set cut in Section 4 below.
During the indictment period the Posi Office used a computerised accounting syslent
kniown a5 Horizon which kept a record of transactions undertaken during each week
‘The Weekly Horizon Cash. Acceumt.weas structured as fellows:
+ Opening balsace due‘ tu Post Office (stuck and cash beought forward from
previous week) ~X
» Rereipts of cash and stock in week «=X
‘Total ‘receipts’ ~
* Payments and remittances in week ~«%
= Closing balance duc to Post Office (closing stock and:cash eartied forwatd)=
‘Total payments” -M
For each transaction carried out vash, a cheque. d debit card payment oy equivalent. would
either be received from or paid tog customer, with the Post Office providing something in
exchanye ¢,g. cash in exchange fora voucher such asa pension ur benefit foil.
The Cash Accounting: Week for exch Post Office ran from Thursday: mormng to
Wednesday evening. and 01 the end of cach -aceounting week allvcash and stock on site
stiould have been veriticd and adopted as the opening ‘cast and stock balasice for the
following accounting week.
Horizon could Be interrogated to provide a. primout Krown as a “snapshot’ which
provided a summiory of the transactions cacried out in the week along with 2 breakdown
HpAUGD h
POL00045790
POL00045790
we
ly
tad
da
3.22
“
fa
‘at
Report tothe Court by T Taylor, a Director in KPAHG. LLP
Suietly private & contdemul
Poipnd 2008
af the, book’ cagh and stock that should be on hand afier tekirig inte account all
transactions.
The individual who undertook the process of balancing the accounts at the end of each
week would verify the cash and stock on hand for eavh stock unit and itsput these inte
Horizon.
A balance iwauld be-achieved if the verified cash and stock on hand agreed with the book
cash and stock according te the Hortzoti snapshot. Any diserepaney should. be declared
aya shortfall or surplus in the Post Olfice’s Weekly Cash Account.
Tn effect, the "Balance due to Post Office’ would be a net balancity figure. If all
transactions, including foreign: currency transactions itom the’ Forde Moneychanget had
becn correctly entered in‘ Harizon. then Honzon should balance,
Bureau de change and Forde Moneychanger system
The Forde Moneychanger (1M) is a-stend alone forevgn curteney calculator that
operates indepondently fiom Horizos. ft performs a variety of functions mehidings
« calculating,the sterling-valuc of foreign currency held,
* keepimg a running check on stock levels; and
* providing information for daily anc weekly agcounting teparting. details of which
are required to be entered manually into Horizon.
Horizon and the Forde Moaeyehanger system. operated. independently, and it was
necessary for foreign currency transferred into or oui of the post office to be entered
separately into the Forde Moneychanger and Horizon,
This inputting would be performed independently and could be done at different times.
resulting in the poteritial for differences to arse between the tivo systums.
wijiss 7
POL00045790
POL00045790
324
325
3.27
3.28
R210
Reporito the Court by T Tevtor. a Director in KPMG LLP
ly ptivate & confidential
Reeviving foreign cutrency
Forcign currency received by the post office was to be entered imo the Forde
Moneychanger at the retail "buy rate’ as indicated by Pirst Kate Travel Services (SF RTS")
ona daily fax sent to the Post Office,
AN! sales umd purchases of forerga currency fand travellers’ cheques) in the week would
‘he made through the Forde Moneycbanger, independent of Horizun.
Daily accounting procedines for foreign currency
At the end of cach acvounting day a ‘Command 3° printout would be produved by the
Forde Meneychonger which would iselide all iransaction: summaries ‘of the day. along
avith the closing balance for each curtency and’a Travellers’ Cheque balance,
‘The printout should have then been chesked, on a daily basis, to ensure thai the balances
of foreign currncy and travellers’ cheques agreed with the amounts physically cn band at
the post office.
Weekly accounting procedures and recording twansactiaux in Horizon (sectioa 15.6 of
Burvens de Change on Demand ~ Operations Manual),
At the end of ea¢h Post Office Cash Accounting week,
® weekly printouts for all wtals should be obtamed from the Forde Moneychanger viag
‘Comunand [0° printout. and
« ghogics on hand and tash physically held in'the buread ull should be separately
entered into Horizon {known as the "BU stéck unit).
The ‘Command 10” printout inciudes.a sterling Value for foreign euriency and a bureau de
change revaluation and conunission totel for the relevant week
Any differences. between the amounts per the ‘Command 10° printout andthe amounts
actually held im the burcau should b¢ recorded as a shortfall or disceepaney in the final
Weekly Cash Agcount in Herizon and sent to the Post Office's head office
ene 8
POL00045790
POL00045790
POL00045790
POL00045790
Despatch of cheques, inchuling cheques used to purchuse foreign currency (Section
14.2 of Cash and Cheque Acceptance Operations Manual)
32.11 Before despaichidg cheques received te the Post Offive cleariny centr: in London. a
cheek should hove been performed by the post affice staff to ensure that. the daily figare
recorded on Hovizon greed with. the actual cheques un hand figure.
3.2.12 Ifthe totals did not agree then any error should hive heer amended in Horizon to refleet
the actual value of cheques of hand. Only on Balancing should the past office have
*remitied out’ cheques [rom the relevant Horizon stock unit tothe London clearing centre.
3.2.13 All cheques, should bs despatched with a completed-Batch Control. Voucher (BC V").
‘The procedures required that cheques should be desputghed on v duily basis.
te yvan7
41
Add
Report to the Court by T Taylor.a Director in KPMG LLP
Strictly paewe & coafidential
? April 206
General
Information considered in my report
In my Work I have considered the following information:
sypAIGD
Prosecutiton’s Opening Note dated 2. Qetober 2005,
Letter from the Royal Mail io Frisby & Co Sedicitors dated 22 February 2006.
Variotis Weeldy Cash Accounts for Rugeley Pest Offies.
Internal audit reports dated June 2902 and January 2003.
Various witness statements and cahibits fron relevant Prosecution. witnesscs
including Mr Patel and Mr Daves,
Exhibit RK/OL ~ Bureau de Change’ operations manuel (version dated 2
September 2002}.
Post Office ‘Cash and Cheque Acceptance procedures manual’ (version dated 3
September 2002).
Extibit $B/01 ~ Copy cheques and associated baich contro! vouchers «June 2000
and January 2003,
Exhibit AW/) ~ Copy HSBC bank statements for RPX Recycled Flasties. Ltd -
Avcount rember 71392875
Estibit MP/3 - Bureau transactions schedule for Rugeley Post Office - 9 March
2002 10 13 Janvary 2003.
Exhibit MP/3A ~ Copy sections of til rolls relating toeriirids on Extubn ME/3,
Exhibic MP/6~ Pereign Currency Disercpunsies Schedule.
Various onde’ Moneychanger till rolls. and ‘Command 10° printouts,
mw
POL00045790
POL00045790
WevnOD
Report 6 the Court by 7 Tayfor, a Livectar in KPMG LLP
Swieily privaic & confidential
Sapell 200
Horizon System User Guide ~ version dated 28 July 2000,
Fleclronic. spreadsheet of information for Rugeley Post, Office from the “remedy
ayster’ which records ‘errors’ and details of telephone calls from Rugeley Post
Oilice,
Andit Process Manual dated 4 May 2002.
Letters from Royal Mai! 10 Mr Page dated 6 Marcly 2001 and 21 May 21102.
POL00045790
POL00045790
3.2
5.24
5.22
33.2
3.34
Raport ts the Court by T Taylor, o Directer ni KPMELLP
Sthatiy prvwe & confidential
Pitprtl 2006
Calculation of the alleged theft
Background
As noted at paragraph 1.12 Mr Page has been charged with the theft af £282,000 in
sterling from Post Office Limited between March 2002 and January 2003,
Summary of alleged theft - 14 January 2003 audit report
An interval audit was undertaken at Rugeley Post-Office on 14 Seruary 2003 and a
shortfall of £282,000 was eventually identified ky the Post Office audit team,
The alleged theft of £282,000 relates to.a shortfall identified speci ficaily in the ‘Forzign
Currency Sterling Equivalent’ figure recorded in ihe “AM stock uait of Horizon, No
such cunency-was found by the audit tam during their audit, [understand that Mr Page
accepts that ne such amount of forcign currenvy was found at that time im Rugeley Post
Offive,
Mr Page denies thai the deficiency arose as'2 tesuit. of theft by him.
‘Inflation’ of the ‘Foreign Currency Sterling Equivalent’ figure in
Horizon
Exhibit MP/6. exhubted by Mr Patel ilusuates how the alleged deficiengy (or ‘inflation’
per Mr Patel) of £282,000 accumulated over time.
‘The inflation referred to by Mr Fatel is simply the difference between the “Foreign
Currer
cy on Hand’ Ggure-as recorded in Horizan by Rugeley Post Office and the ‘stenting
eyuivalent foreign currency on hand’ figure as identified from ‘the weekly Forde
Moneychanget*Conmmand 10° printouts.
Exhibit MP/6. shows that the first period where there was 4 Significant inflation in the
‘Foreign Curreney Sterling Equivalent’ figure in Elorizotr was in ihe week ended 26 Juric
2002 (Week 13) when ihe amount is said to be inated by £53,378 64.
Ip the two weeks ended. 3 and. 17 fuly 2902 (Veeks 14 and. 16) the Manton figure is
nvgative, One of the negative ‘inflation’ figures is esplained.as being tie result of typing
Wipihig 12.
POL00045790
POL00045790
5.3.6
5.4
Sad
SAL
wm
te
te
Report io the Count by TTaylur. a Ditestor ia KPMG LLE
Strictly pavate & confidennal
7 Apel 30H
an incorrect tevaluation figure ina Horizon byt there 1 io apparent explanution for toe
other negative inflation figure ie. the week ended 3 July 2002 OWeek 14) This
demonstrates ihat as’ Torizen and the Fonic Moneychanger were not integrated,
differences could arise as a result of manual inpaltg errors,
The next significant inflation in the ‘Foreign Currency Sterling Equivalent’ figme is
shown in the week ended 31 July 2002 (Week 18) when the’ inflated figire per MPY6 is
£177,300, I have not seen a copy of the “Command 10’ printout for this period. It is not
clear t me whether it is alleged by the Prosecution that the theft by Mr Page hail reached
£177,500-by this date,
Exhibit MP/6 indicates: that, from’ the week crded 28 August 2002 (Veck 22), the
Horizon “Forcign Curency Sterling Equivalent’ Sgure was -inflated, initially’ by
£188,000. and increasing to £282,060 by the date of the intemal audit on 14 Jurmuary 2003
(Week 41},
How was the alleged theft concealed?
‘the Prosecution’s Opening Note states that cash, in sterling, wos stolen by Mi Page over
a period of time and, from the week ended 28 August 209? (Week 22). this was concealed
by Mr Page routinely inflating the Horizon computer records in -reletion. to foreign
currency held in the Rugeley Post Oflice “AM” stock unit.
I also note from the Prosecution’s Opening Note. that. some lime prior te Week 22. the
alleged the by Mr Page iy alleged to have been concvuled by overstating the amount of
Overnuht Cash Holdings’ CONCH") Jheid at Rugeley as. opposed to: ihe ‘Foreign
Currency Sterling Equivalent’ figure in Morlaon,
Thave seen no evidence regarding the alleged theft concealment via the “ONCH” figure,
inchiding a8 to how and when any such conccalment was undertaken prior to the -week
ended 28 August 2002 (Week.22). Lxipte that the Roval.Mail Ieitcy dated 22 February
2006 to iny-instructing soliciters states That there are“... difficaltics i assessing tre true
ented”.
Bosinon uf the cash / stock held when nanipvlered aecotnts
Hyp Une LR
POL00045790
POL00045790
S44
545
$4.5
54.7
55
5504
5.5.2
Report to the Count by Taylor, Director th KPMG LLP
Strictly private’s. confidertal
7 Apnit 2006.
Prior to Week 22
If it is alleged that by the week ended 31 fuly 2002 (Week 12) the thefl hed reached
£177,300, and that it wars boing concealed either by oversfating the true. loreign cunency
balance of the ‘ONCH’ figure. then. in my opinion, thete is an Uncaplained. meonststency
in the Prosecution s case as set out below’.
Firstly [ nete that in the two weeks ended 14 and 21 Aagast 2002 (Weeks 20 und 21), the
inflation figuras as stated by Mr Patel (see Exhibit MP/G) are nil,and therefore au
concealment is attributed 10 this item,
Secondly f note thai the recorded “CINCH figure (see Weekly Cash Avepumts) for the.two
weeks ended 14 and 21 August 2002 was only £79,819.00-and £91,240.69 respectively,
and therefiue they could riot be overstated by £177 500:
‘the Prosecution have not as. far as [ am aware offired any alternative explanations
regarding. methods of concealment other than the overstatement of the “ONCH’ or
‘Foreign Currency Sterling Equivalent’ figures m Horizon,
Seek 22 onwards
J agree with Mr Tatel-that as from the week. ended 28 August 200% (Week 22) the
Horizon ‘Foreign. Currency Sterling Fquivalent’ figure was inflated, intially by
£188,000, and iherecsing to £282,000 by the date of the audit on 14 January 2603 (Werk
4).
1 have aysced the inflation figure caleulated by Mr Patel io The llorizon and Poids
‘Moneychanger figures for Weeks 22 to 41 itclusive, cxvept for Weeks 23 and 24 where
ihe ‘Command {0° prints have not been made available (and where according ti Mi Patel,
the figures were obtained rum Chesterfield),
Audit process
I have reviewed a copy of the: Veetir of decounts" section frormthe Audit Process Manual
(version dated 4° May 2002).
Based on a review of the manual, the Post Office audit is primarily ane of ‘asver
verification’ in dutermining the value of cash, stock and vouchers ‘on hand* ~ it woald
jp wey ic
POL00045790
POL00045790
mn.
ta
oe
554
5.5.5
5.6
5.6.4
5.62
$63
Report w the Court by T Tay tor, a Direetor in EPMNGLLP
Striedty privaie & considential
2 Aprit 2006
appear thal sone of the other figures in ihe Weekly Horizon Cash Accounts would have
heen checked or verified to any other source documentation as pm of she audi In
addition a number of “Compliance Tests” may also be undertaken in rekativn io Post
Office procedures and controls,
The Post Office audit team would firstly ascertain the number of individual stock uncts
operated at the sub-post office and obtain an overall "snapshot" for the whele post uffice
and a ‘snapshot’ for each individual stack unit. The subspostmaster would be asked to
make al} cash and stock on hand available which would be checked against amounts
secorded in Horizon,
Wher: vouchers ad beer despatched by the sub-pust office these would not be checked
atthe hime.of the audit. Any criars found subscyuently m the documentation despatched
by the post office prior to the audit would be dealt with by way of ari ‘ortor notice’,
Lreview such notified. ermnes' im Section $.7,
Audit of 27 June 2002
Evidence of Mr Robert Dovics — iitness statement dated 16 Mavele 2004
An audit was underiaken by the Post Office Security & Audit Seetion-ari 27 June 2002 for
the week ended 26 Jume 2062 G¥eck 13), in the course of which the miernal audit team
checked. individual cash und stock balances: in cach stock unit physially. oi site at
Rugeley-and compared them with whai was recorded.in Horizon,
Tnnte that the. Post Office audit renort made reference to the faet that. “de burese ius
rebalanced showing the actual on hand, This produced a shartige of €33k...°. This
anigunt 18 also'the ‘inflution’ figure referred to by Mr Patel as at 26 Jame 2002 in Exhibit
MP4, although Mr Patel does not state whether or not be is of the opinion that this relates
to the concealment of an alleged theft, This differmce appears to have urisen as a sesuit
of the sales figure fir the week from the "Command 10° péintoui rather than the foreign
currenvy on-hand liguee hemg entered inte Horizon
Lnote the Post Office audit report stated that. the overall result from the audit. was a net
shortfall of £8.335,63,
t'jp/69 1S
POL00045790
POL00045790
5.64
5.6.5
56.7
5.68
Reportia the Court oy T Tylor, ¢ Cirector in KPMG LLP
Sivictly private.a. confidential
? Agetl 2005
Further evidence of Mr Robert Davies — witiess statentent dated 18 February 2006
noit that the Prosecution have now provided further evidence in respect of the Jime
2002 audit.
‘The shortfall identified at the time i¢ analysed as follows
e “BU bureau stock unit surplus.reporied £191 19295
» “AM” stack unit shortfall reported (£145,872 74)
a Shortfall in the bureau cash and stock held (2: 54,285.40)
* Other diftcrences {2 369.38)
Totat {£_8.335,63)
Mr Davies now states that three cheques totalling £139400.00 (being cheques for
£80, 124.22, £49,689.44 and €9,.586.24 respectively) were meluded in the Week 13 Cash
Account figurés, being the week ended 26 June 2002
Qu the basis of the aecounting evidence made availadle-to me, 1 agres with Mr Davies’
coaclusions that the two larger of the three cheques which he reters to should not have
been inclided in the Horizon account for the wock ended 26 June 2002 and henec the
shortage as calculated by the audit teum should be increased by £1.29,812.66 (280,124.22
plus £49,689.44),
1 would however note that itis not possible for me now to check whether or not the
amounts ‘verified’ at thé audit were correet as the audi process is largely one of simple
agset verification.
However, if the above iratter was the only “errur’.in the June 2062 audit then the revised
deficit in the Weekly Cash Account should, as Mr Davies states, be inereased to
£138,149.29,
wipe 1G
POL00045790
POL00045790
$.6.16
5,7
5.73
5.74
S75
Report fo.the Cauit by T Taylor, a Director in KPMG LLP
Stristly oraate.& confidenital
7 April 2006
Third cheyue referred to by Mr Davies in his witness statement
Lnote that the third chequz referred to by Mr Davies for £9.586.34 cleared the bank on
the same date as the other twe cheques and theretore it may oc, that thus alse should be
included in the revised shortfall figure.
‘Errors’ pre-January 2003 audit
Independent of ‘the above issues, I note from correspondence prior to the audu oh 14
January 2003 that the Post Office hud identified a large number of ‘errors’ and issues with
Rugeley Post Office.
Lnete, for example, ma letter to Mr Page dated 6 Match 2001 (although fiom the
sequence this seemingly should. be dated @ March 2002. not 2001}, reference is made io
“There have been 170 errors recorded against your offices to date”.
In a further letter to Mr Page srom the Post Office dated 2! May 2002 itis noted that
Your ont turn for the yeorr 2081/02 has boea reported at 204 errars. 1 have also heen
Givised theta further 21 wrars have been incurred during period 1 (200203). 1 sttovld
remind you save again tlist your performance is utaceeptuble vond that Tavnediate
improvement is required...”
In addition io the: above I have been provided with a list of *irwident logs” from the
‘semedy systern’ in.relation to Rugeley Post Office. These refer te numerous ‘erfors’ or
incidents, I have sumiharised below a number of exaniples below which appear tu he of
relevanee to the overall accutucy of the accounting records at Rugeley.
fu the absence of more detiiled information Thave siniply noted ihe following:
* 8 June 2000 ~ refers to advising the sub-posimaster: that he should not be
entering commission twice in respect af the bureau de change!
« 17 July 2000 - refers to Rugeley Post Office receiving ‘error notices’ and
being ‘...#9,00 at « lons-for lottery” and told the cash account, sent hed heen
incorreet [or lottery:
rjwoy uv
POL00045790
POL00045790
tUjpoee
Report to the Court by T Taylor, a Darector in KPMG LLP
‘Strictly private & confidential
7 Apel 208
28 March 2001 — refers 00. the postmaster wishing to reversd a transaction of
‘the woneychanger (bureau decchange):
1! Ociobs:. 2001 ~ notes 25 crrors end that Kugelcy Post Office was m the
‘wore 10%" in the overs) league posits
returned and that the Pust Office should ensure that all cheque acceptance
procedures for ‘the product’ are followed cortéctly.
. Also: refers te unpaid cheques
19 Noveorber 2061 ~ notes 62 cumulative errors by Period’ 7 aad that
Rugeley Post Office was stil] fh the ‘worst 0% * an the oversll league
position:
14 Devember 2061 -- refers to further error neuces.at Rugeley in Week 39;
14 Janyary 2002
having 12 errors;
clers to a further 11 curors in Perigd & aad the outict now
14 February 2002 . refers to the outlet baving 29:errors arid that Jim Coney
willbe issuing a wnitten warning to the outlet:
15 April 2002 — refers to *
has 18 errars”,
catgitan for aver I Lerrers pr Period 12. Outlet
15 May 2002 ~ refers to “£vealatlon forrover 17 errors in Period 1. Outlet
has 2) ervars”:
27 June 2002 ~ refers'to the June 2602 audit and thes the bureau unit was
‘volled over” with ingortect bireau figures (€82,772.85 und should. have been
£29,487.39):
4 July 2002 ~ notes anussuc with balancing Horizon and the *... dat accent
surplus wid utinus in suspense account off 191.192.95 and aso 145,873.74
wines”. The incident report also makes reference as to how to remave'a gain
from the Suspense Account
POL00045790
POL00045790
5.8
581
Keport to the Court by T Tuytor,.a Ducgior in KPMG LLP
Sinedly private & confidential,
F oipril 2083
© 29 hhily 2002 — refers ts the fact Mr Page was not sending in paperwork until
Monday raoniing because Ruguley wete “0 euubien te checking
paperwark” and reters to the need for performance imprsvement: and
* 15 August 2002 ~ refers tothe outlet having 24- errors and gn évalation of
errors in Period 4,
Matters where Lam unable te.comment further
Based-on a review. of the evidence provided itshas not been possible’ for me tu canfirtn
whether a shortfall as alleged was concealed in the ‘ONCH* figure in Honor aa these
figures were never (other than in the two audits. noied above) the subject of an audit.
in. audition I note that the Prosecution have provided nu evidence regarding the accuracy
of the other figates ia Horizon. They simply indivate that the Qyures set out in the
Weekly Cash Accounts are those as submitted by Rugeley Post Office,
fujpawe ts
POL00045790
POL00045790
6.4
611
Report ta the Court by T Tayfor, a Oitector 1 KPMG LLP
Strictly private & conitdeatiuk
7 pett 20
Summary and conclusions
My overall conclusiens
Jn suatimary I novt the follewing:
wind
Tagree with Mr Patel that as frem the week ended 2% August 2082 (Week 22) the
Honzon “Foreign Currency Sterling Equivalent’ figure way inflated, :nitially by
£138,000, and increasing to £282,000 by the date wf the audit on 14. January 2003
(Week 41)
TL agree with Mr Davies (witness statement dated 18 February 2006) that, on the
basis of the accounting evidence available, the shortage in the audit of 27 June
2002 should be increased by £129,813.66, and possibly hy a furrher £9 585.24;
‘The alleged deficiency of £282,900 in the ‘AM! siovk unit ar 4 Januery 2003
dacs not necessarily indicate theft by Mr Page’~ any such shortfall could in
practice be the result of other unidentified ervors‘or differences in Horizon.
It ts implicit in the Prosecution’s case that, vy. simply stating that the £282,000
shortfall in the ‘AM stouk unit equates to-9 theft of the same amount, all other
figures in Honzon (except for the differences identified at the audit) were carteet,
T have: seen ad evidenee that this us’ fhe ease und would ‘also noie the bigh
incidence of ‘errors’ a8 set out in Section 5.7.
‘The Prosecution rely on the assumption that the figures in Horizon we those
reourded by Rugeley Post Ofice statt themselves and that the ‘Horizon’ system
was working corrcetly throughout the indictment period:
It is now mnt possible to establish whether the declared ‘ONCH" figures were
conectly reearded in Horizon as they were not independently checked at the time
other thgn at the two audits;
{f it is alleged that by the week ended 31 July 2002 (Week 18) the the A had
reached £177,500, and thot it was being concealed vither by overstating the toue
foreign currency balance or the ‘ONCH(’ figure, then. in ty opinion. there is an
a0
POL00045790
POL00045790
POL00045790
POL00045790
Report te the Count by T faylor, # Ditvetor ti KPMG LL?
Striutiy private & confidential
2 Aprd 2006
unexplamed incunsisiency if the Prosecution's ease, This is beomuse jn the two
weeks ended 14 and 21 August 2002 (Weeks'20 and 21). the inflation figures as
stated by Mr Patel are nul and the regarded *QNCH? figures were only £79.810.00
and £91,240,69 respectively, atid therefore they could not be overstated. by
£477,500.
T Taylor MA FCA MAK MEWI
KPMG LLP
1 The Embankment
Neville Street
Leeds
ESL aDWw
trypma 2