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Initial Complaint Review and Mediation Scheme
Post Office Investigation Report
Branch Name: Edmond Post I Branch Code: I 475329 Case Mo21
Office Number:
Applicant Name: I Sunil Paul Status of Mediation Date of 25/04/1996
KHANNA Case: Application Appointment:
Executive summary
The Applicant has concerns that issues relating to the branch were not raised with him prior to the audit in
September 2008; in particular, that as Subpostmaster he should have been the point of contact for Post
Office rather than the Officer in Charge (OIC), Peter Holmes (PH). He also questions why he was never given
an explanation by Post Office as to how the loss occurred and did not receive sight of any report from the
Post Office Investigating Manager.
The Applicant says he was aware, through his discussions with PH, of Horizon issues and, in particular, a slow
connection between the Horizon branch terminals and the Post Office data centres, which made customer
service challenging at times. He considers that this may have been a contributing factor to the losses at his
branch. He has also suggested that there may have been issues with the advice given by Post Office
Helplines, as well as difficulty on occasions in accessing these services.
The Applicant was appointed Subpostmaster at Jesmond Post Office, commencing on 25 April 1996. He
remains in post. The premises also contained a pharmacy and the Applicant dedicated his time to this
enterprise, which meant he was not involved in running the Post Office branch.
The Applicant appointed PH to manage the branch and in effect PH was responsible for the day to day
running of the Post Office, including staff issues, compliance and balancing the branch accounts. PH had
previous Post Office experience as a former Subpostmaster as well as conducting relief Subpostmaster duties
prior to his appointment at Jesmond Post Office.
Following an audit at the branch on 18 September 2008, the Applicant was informed that there was a net
shortage of cash and stock of £46,049.16. This was the first indication that the Applicant says he had that
anything may have been amiss with the branch's account. PH was suspended (and subsequently dismissed
by the Applicant) after admitting to ‘False Accounting’, that is to say falsifying the cash on hand figure in the
accounts over a period of 6-9 months. PH later pleaded guilty to this charge at Newcastle Crown Court, and
in January 2010 was sentenced.
‘As the Applicant had overall responsibility for performance at the branch (as subpostmaster), and in
accordance with the terms of his contract, he was responsible for the shortages amount discovered by the
audit. After paying an initial sum of £7,049.16, he agreed to repay the outstanding debt out of his
remuneration at the rate of £1,300 per month over a period of 30 months (commencing in December 2008).
The debt is now repaid (Doc 001).
Conclusion
Based on the evidence examined as part of the Mediation Scheme investigation, there is nothing to suggest
that Horizon was responsible for the shortage discovered by the audit on 18 September 2008. Whilst it is
clear that problems with Horizon equipment at this branch had a negative impact on customer service on
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occasions and must have been frustrating for the branch staff, the HSD (Horizon Service Desk — the central
point for branch contact regarding Horizon technical issues and queries) call logs indicate that much activity
was going on behind the scenes to rectify the problems. Ultimately, the operation of the branch telephone
line was a key root cause of many of the difficulties encountered. This line is the responsibility of the
Applicant and the fix was under the jurisdiction of BT who rectified the problem. It would appear that issues
under the remit of Post Office were more minor and were settled satisfactorily (Horizon and other hardware
problems, etc).
In any event, if over £46,000 in transactions had not registered properly on Horizon one would reasonably
expect there to have been a trail of customers and clients querying accounts and transactions; this was not
the case. Also, the branch was cash surplus in that they sent back money rather than receiving it generally.
If the Horizon system was at fault as the Applicant suggests, it is highly likely that creditor deposit
transactions would have been impacted; however, this was not the case.
During Post Office's investigations in 2008, PH stated the branch was losing £3,000 to £4,000 per month
when in fact the monthly balancing records show dramatic fluctuations (including significant surpluses). This
indicates poor accounting and balancing procedures at the branch, which were the ultimate responsibility of
the Applicant.
Post Office's conclusion is that the cause of the £46k shortfall in this case is likely to be the cumulative
product of operational errors in the branch by PH or other staff over an extended period of time (such as
mishandling cash, mis-keying transactions into Horizon, etc). Alternatively, the possibility of theft or fraud by
PH or other staff cannot be ruled out.
PH has admitted to making false entries on Horizon and Post Office believes that extensive false accounting
took place in this branch over a9 month period. Due to this false accounting, any small operational losses
would not have shown in the branch's accounts and would only have revealed themselves as a single large
loss following the audit in September 2008.
The false accounting also meant that it was not possible at the time of these events, and it remains
impossible now, to precisely identify all the erroneous transactions which have caused the £46k shortfall.
Post Office is unable to determine the precise nature of some of the branch errors as, by their very nature,
these errors happened in branch and were therefore outside of Post Office's knowledge or control.
Furthermore, Post Office primarily relies on reviewing the branch accounts to help subpostmasters identify
errors but because the accounts in this case have been falsified, it is not possible to distinguish between
genuine errors and intentionally false entries.
It would appear that Post Office did not monitor the balancing fluctuations centrally at the time of the events
in question; under current Post Office processes such patterns of transactions may have been noted quicker
with intervention activity being instigated at an earlier stage.
That said, more robust controls over branch procedures and accounting by the Applicant would have
ensured that hidden shortages could not have built up even over a short period. Either the Applicant should
have been more aware of operating procedures to allow him to conduct ‘spot checks’ or other members of
staff should have been empowered to perform them in order to create secondary checks on declarations and
balances submitted by PH.
Post Office is therefore of the view that the Applicant is primarily culpable for allowing the opportunities for
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PH or other staff to cause losses in this branch.
The Applicant's complaint
Although the Applicant was not involved in the day to day management of the branch, as Subpostmaster
overall branch responsibility was his. Many of the issues he raises are therefore received second hand
after discussions with the OIC.
The Applicant has highlighted a number of operational issues that caused problems on an ongoing basis:
- Horizon ‘crashing’ on numerous occasions, as well as operating very slowly at other times, which
made customer service difficult.
- When Horizon ‘crashed’, there was no documentation provided to assist with the recovery
process.
- The Applicantalso states that TCs (Transaction Corrections) could be delayed by up to 12
months before being received in branch.
- The Applicant also refers to delays in being able to contact the relevant Post Office Help Desk
‘on occasions when problems arose in branch.
There are also other areas where the Applicant has raised issues that require investigation, namely:
- The Applicant received no notification prior to the Audit of balancing discrepancies at the branch.
- Although the Audit showed a substantial loss, there was no indication, reason or proof given by the
Post Office as to how this may have occurred.
- The Applicant also questions why he was suspended even though he had no operational input
into the branch on a daily basis.
- Furthermore, the Applicant states in his submission that he has never signed, or received a
Subpostmasters’ contract.
These issues are addressed in detail in the ‘responses’ section later in the report.
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Case Review Actions
Summary of the information collated by Post Office
Information available from Post Office records:
Information area Information Information not Information not available for
provided with available as beyond other reason
this response retention period
EFC (Electronic Filing x
Cabinet)
Prosecution/Security File X Legal Privilege
HSD Call Log & current x
service level data
NBSC Call Log & current x
service level data
Horizon Transactional x
Data
Background information x
provided in Emails
Office Hard Copy File x
Horizon System User x
Guide
Training Records (from x
1996)
_ Response to issues raised by Applicant
Issue raised
Investigation findings
1. The Applicant received no
notification of any issues
regarding shortfalls prior to the
audit.
‘As Subpostmaster, the Applicant was responsible for
discrepancies in branch, as outlined in his contract (Doc
002, page 49). Although he was an absentee
Subpostmaster, the onus was on him to be aware of
relevant issues and problems in the day to day running of
the branch (which would include balancing). It would
appear that this did not happen (Doc 003), as from
August 2007 throughout 2008, the OIC (Officer in
Charge), Peter Holmes , stopped handing the Applicant a
copy of the Branch Trading Statement and the Applicant
did not appear to s eek one. The discrepancies shown on
the previous months Branch Trading Statements
therefore came as a surprise to the Applicant when the
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figures were disclosed to him following the Audit (Doc
003).
At the time, Post Office was not required to check the
balancing record of individual branches as the
Subpostmaster contract stated that losses and gains
should be made good in branch (Doc 002, page 49), and
there was a line on the Branch Trading Statement to
show this had been done.
The Applicant therefore would not have been contacted
by Post Office regarding balancing problems, and it
would only have become an issue if he had raised it.
The Post Office claimed that the
Horizon System was correct but
yet failed to prove how the
shortfall in cash came about.
Whilst it appears that the telephone line caused some
problems with Horizon at the branch (Doc 004); nothing
has been identified to indicate it was responsible for the
£46k loss at Audit.
The Post Office undertook an investigation into the loss.
The Investigating Officer, Robert Daily, noted that
Horizon had been checked and allegations about its
accuracy were unfounded. The OIC admitted falsifying
the accounts over a period of 6-9 months (subsequently
pleading guilty to this charge in court). There was
originally a suspicion that he had taken the money to
supplement the deposits being paid into his wife’s cake
making business. However, a forensic accountant
(employed by the OIC), reported this was not the case to
the court. The deposits were transacted in branch by the
OIC himself, which was bad practice (personal
transactions should be dealt with by another clerk), and
the amounts deposited over a 12 month period were
similar to the branch loss sustained.
Ultimately the OIC admitted ‘false accounting’, and
under the terms of contract, the Subpostmaster was
liable for the shortage.
The general findings of the investigation however were
discussed with the Applicant by Michael Haworth (Agent
Contract Manager), during their meeting in Leeds on 9
October 2008. The Applicant signed, as a true reflection
(Doc 016 refers), and was provided with a copy of the
interview notes. Although he stated he was unaware of
the discrepancy until the Audit, he was reminded of his
contractual liability to make good the loss, and a
discussion was had as to how this would be repaid.
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The Applicant was suspended (but
ultimately reinstated) because of
the shortfall, despite him not
using the Horizon system, or
managing the branch ona day to
day basis.
Although a Subpostmaster is permitted to appoint an OIC
to manage the branch on a day to day business, the
Subpostmaster retains responsibility for adherence to
procedures, compliance and balancing.
It appears that the Applicant did not exercise enough
influence, or control, over the OIC as he was totally
unaware of the losses building up prior to the Audit on
18 September 2008.
Also, there was previous his story on this subject (albeit
on a much smaller scale and many years before), which
resulted in an exchange of correspondence (Doc 006)
with the Applicant, and an assurance from him that all
correct balancing procedures would be followed in
future. Remedial and ongoing activity at that stage by
him (including robust monitoring systems), may have
averted future problems.
The OIC did not allow other clerks to complete the
Branch Trading Statement, thus ensuring he continued to
conceal the los s. Al though the Applicant states he told
the OIC that other clerks should be involved in this
process (Doc 003), he does not appear to have followed
this instruction through with regular checks.
The Applicant did not appear to be conversant at all with
Horizon (he did not have a user name assigned in branch,
so obviously did not operate Horizon at any time). The
Applicant should have equipped himself with a working
knowledge of Horizon, and a more ‘hands on’ approach
would likely have identified problems at a much earlier
stage. Part of the agreement for the Applicants later re-
instatement was that he undergoes Horizon training in
branch, even if he still intended to appoint another OIC
to manage the branch on a day to day basis.
The Applicant was re-instated in post following his
interview with the Agent Contract Manager on 9 October
2008 (resuming his responsibilities on 19 November
2008).
It was accepted that the Applicant was not involved (and
was unaware), of any of the activities leading to the
discovery of the shortage at Audit. Therefore, pending
agreeable terms of repayment of the debt, which were
forthcoming, the decision was made to re-instate the
Applicant with some conditions attached (Doc 001).
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These included the Applicant undergoing refresher
training on Horizon, and appointing a suitable OIC to run
the branch in his absence.
After checking with the HR (Human Resources) function,
and in accordance with his contract and Post Office
policy, the Applicant was not remunerated during the
period of his suspension (Doc 007).
Horizon system “crashed” on
numerous occasions.
There is no reference in the HSD call log for the branch
during 2008 (Doc 004), to the system ‘crashing’ (up to
the date of the Audit), but the log contains 4 calls relating
to Online Services being unavailable. The call originating
‘on 19 February 2008 was particularly complex and was
not closed down/remedied until 3 April 2008.
The main crux of the problem was an intermittent issue
with the telephone line, and as such remedial action
could ultimately only be undertaken by BT (as line
owners). This appears to have led to delays and
frustration within the branch.
This would not have impacted on balances a s Online
Services transactions (Debit cards, Post Office Card
Account etc) would not have been available during
periods of the line ‘being down’. Such transactions
would therefore not have been able to be input at these
times.
POL took up to 12 months to s end
the error notices to the branch
and that several were outstanding
for this branch.
Transaction Corrections (formerly known as Error
Notices) are returned to branches once they are received
centrally. The timescale for this process varies
significantly dependent upon the type of error ma de in
branch originally. Internal type errors (such as cash
shortages or surpluses made up and sent to the Cash
Centre), will be highlighted and returned much quicker
(generally within a month), than client based errors. For
these errors, Post Office is dependent on the client
raising the error and confirming it, which can on
occasions take many months.
The TC record a t Jesmond Post Office (Doc 008),
covering the period from October 2007 to December
2008 hi ghlights 31 TC’s being returned to branch. Of
these, 24 were remittance related errors (highlighted in
yellow), although not substantial in value. These errors
would have been returned to branch within a short
timescale. This type of error suggests poor in branch
accounting procedures, especially given the volume here.
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There is therefore nothing in the TC data for this period
to indicate any delays in the branch receiving errors back,
or any anomalies with the errors themselves.
There is also no record of the branch chasing TCs
themselves; although the OIC stated he thought they
may receive TCs back (Doc 005), to offset the growing
discrepancy at the branch (even though he was not
declaring it).
Horizon would crash during
transactions and would then not
provide instructions on how to
recover the transactions.
There are no specific references in the call logs to the
branch requesting information on recovery instructions
following a problem with Horizon. Helpline staff have
access to relevant information to assist branches who call
for assistance on these types of matters, so this help
would have been available if required.
Also, every branch was in receipt of a number of
manuals, one being the ‘Horizon System User Guide’
which outlined in great details (over 550 pages), all
operational elements relating to Horizon (Doc 009). This
included large sections on transaction recovery (and the
process for dealing with losses and gains), so
comprehensive information was already available in
branch.
Horizon suffered from slow
performance that made it difficult
to serve customers.
There is evidence that this was highlighted by the branch
to the NBSC (Doc 010, tab1, lines 52 and 53), but this
dates back to May 2000. There is no subsequent entry
on this subject, although it may be tied in to the poor line
performance issues highlighted elsewhere in this report.
There is no doubt that this would constitute a major
inconvenience within branch, with some customer
transactions being delayed or not being able to be
undertaken if the Online Services was unavailable.
However, this was tied into the wider issue of the
problems with the telephone line that ultimately resulted
in the visit from BT engineers who remedied the
problem.
Delays in being able to contact the
NBSC and Horizon helplines.
There are no records in either the NBSC or HSD call logs,
in the period prior to the Audit, of the branch making any
reference or complaint about the time it took to answer
their call.
To put this into context, the branch made 12 calls to the
NBSC Helpline (Doc 010 Tab 2), and also 13 calls to the
HSD (Doc 004), in the period from February 2008, up to
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the Audit on 18 September 2008.
There are no statistics available from 2007/08 detailing
waiting times for calls to be answered, but data is
available for the current year to give some flavour. The
NBSC calls answered for 2012/13 gives the average
answer time in seconds (Doc 011), whilst the HSD call s
answered (Doc 012), shows the number of calls
answered weekly, with a further figure showing the
number of those calls that are answered within 30
seconds. Both sets of figures appear to be satisfactory,
but as stated, statistics for 2007/08 are not available.
The Applicant states he never
signed or received a contract with
Post Office.
All Subpostmasters have to sign various documentation
before they can commence in post (Doc 013 refers). The
only documentation located from the period relating to
the Applicants initial appointment is signed by him,
stating he agrees to the terms and conditions outlined in
the letter (Doc 014).
It should also be noted that the Applicant requested a
copy of his contract (and the disciplinary procedure), be
sent to him ahead of his hearing with the Agent Contract
Manager (Michael Haworth), in (Doc 015). It is not clear
whether or not these documents were sent to the
Applicant or not.
It may be that the Applicant was not in possession of a
copy of his contract a t that time, although the process
(as outlined in Doc 013), states that a contract would
have been left on site for new incumbents (in 1996 in the
case of the Applicant), or requested by the Trainer/Audit
or from the Agency Recruitment Team.
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ng
List documents (if any)
Reference
Descriptions
MO021_POL_001_Reinstatement Conditions
Letter_JO
Letter from Agent Contract Manager
MO021_POL_002_Subpostmaster Contract_JO
Blank copy of Subpostmaster contract
MO021_POL_003_Applicant Witness
Statement_JO_
Applicant witness statement given to
Investigating manager
M021_POL_004_HSD Call Logs JO
HSD (Horizon Service Desk) call logs
February 2008 — September 2008
M021_POL_006_Audit Shortage 1997_JO
Correspondence trail relating to conformance Issues
arising from Audit in 1997
M021_POL_007_Remuneration Email_JO
Email from HR (Agent Remuneration)
M021_POL_008_TCs Oct 07 - Dec 08_JO
TC’s (Transaction Corrections) received in Branch
M021_POL_009 Horizon User Guide_JO
Horizon System User Guide
MO021_POL_010_NBSC Call Logs Nov 99 — Sept
08_JO
NBSC Help Desk Call Logs November 1999 -
September 2008
M021_POi_O11_NBSC Average Call Time Data
2012-13_JO
NBSC call answer time data 2012-13
MO021_POL_012_HSD Average Call Time Data
2012-13 JO
HSD call answer time data 2012-13
MO021_POL_013_Contract Information Email_JO
Background historical contract information
MO021_POL_014_Conditions of Appointment_JO
Offer of appointment following successful interview
1996
MO021_POL_015_Interview Acceptence_JO
Applicant acceptance of interview with Agent Contract
Manager
MO021_POL_016_Jesmond RTU Interview
Notes JO
Notes from interview between Applicant and
Contracts Manager
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