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Mr S Dilley 5 September 2006
Bond Pearce
DX 8251 Your ref: SID3/KAK2/348035.154
PLYMOUTH Our ref: MM/GWP/00113049
Direct line:
E-mail: mike.maso
Dear Stephen
Post Office Limited v Lee Castleton - Claim number HQ05X02706
14 South Marine Drive, Bridlington YO1S 3DB
Thank you for your letter of 22 August. We shall be pleased to help in providing
accountancy assistance in respect of this matter, and to prepare a formal accountancy
report. I will be writing separately in relation to the formal IT report.
We have undertaken a preliminary review of the papers that you sent us. I would like to
thank you for the clear way in which the papers were presented to us which has been very
helpful to our initial understanding of the problems at South Marine Drive.
We realise that this is a complex matter with possible implications that are far wider than
just Mr Castleton’s operation of his sub post office. It will be important to present our
findings in a clear and understandable way that demonstrates whether the problems solely
relate to Mr Castleton or to the wider Post Office system.
Our approach to the work
Our approach to the work will be based on the following plan:
a) Given that Mr Castleton did not report any problems in the five months from July
2003 when he started at South Marine Drive to 23 December 2003, we will inspect
this period, firstly to confirm whether there were any indications of any problems in
that period (the non problematical period). Secondly we will ascertain whether
there were any differences between the operation of the sub post office and of its
accounting system in the non problematical period and the subsequent period in
which the alleged losses arise.
b) It will be equally important to demonstrate that the problems ceased when Mr
Castleton was suspended. Although Mr Jones reviewed the position for the initial
few weeks after Mr Castleton’s suspension when Mrs Simpson was running the sub
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BD O BDO Stoy Hayward LLP Mr Dilley
Bond Pearce
escent 5 September 2006
post office, I feel that we should look at a longer period to demonstrate that the
problems did not reoccur. We would therefore also consider the figures whilst Mr
Booth was the temporary post master.
c) The majority of our work will concentrate on the period of some fourteen weeks
between week 39 (24 December 2003) when Mr Castleton first reported a problem
in balancing and week 52 (24 March 2004) when he was suspended. For this period
we propose to look at transactions on a strict chronological basis, day by day.
d) We will look at the daily transactions to see if there are any anomalies. We will
investigate each problem that arose to ascertain its cause. We will then look at
whether Mr Castleton reported the problem and how it was dealt with.
e) ‘We will in effect be recreating the summary that Mr Jones produced (document 54)
but will demonstrate where each figure comes from and how it has been verified.
We will also ensure that all summaries are understandable to those unfamiliar with
the Post Office accounting system.
f) Given that there are suggestions that some parts of the difference may have been
duplicated we will be paying special attention to how each difference has been dealt
with and to see whether it could in some way affect subsequent days.
g) The case against Mr Castleton has been based on the Horizon accounting system
records generated at South Marine Drive. We will consider the extent to which
transactions can be proved externally. We will therefore wish check whether errors
have arisen in the paperwork that Mr Castleton sent to the transaction processing
centre and whether any such errors have been corrected properly at South Marine
Drive. This would also apply to any errors resulting from documents sent to
National Savings, Girobank or other organisations for which the sub post office
accepts deposits or allows withdrawals.
h) We will need to consider any matters relating to the accounting system that were
discussed by Mr Castleton at meetings with Post Office managers before he first
told Catherine Oglesby that he had a problem balancing week 39. I assume that as a
new sub-postmaster there would have been visits by Ms Oglesby or other
supervisors during the summer and autumn of 2003.
i) We will consider whether there are indications that any of the differences are due to
the actions of Mr Castleton’s staff. He says that the differences were not caused by
his staff and I feel that this must be explored.
aD) We have a summary of the telephone call log from South Marine Drive to the help
desk for the period 19 January to 23 April 2004 and prints of the call details from
20 January to 23 March 2004. For completeness we will need to review a longer
period to see both what problems Mr Castleton had reported in the period from July
2003 and any that were reported by the temporary postmasters after his suspension.
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BDO Stoy Hayward LLP Mr Dilley
Bond Pearce
Mearosainenart 5 September 2006
k) We are aware that there are issues regarding Mr Castleton’s ordering of cash for the
payment of pensions and benefits and the deposit of cash by customers. We will
examine these points to see what effect they have, if any, on the differences.
1) Our conclusions will be presented in a detailed report that will include:
a. An explanation of the Post Office accounting system as it affected the
South Marine Drive sub post office;
b. Mr Castleton’s operation of the system noting any divergences from Post
Office rules or recommended practice;
c. A discussion of any errors that have arisen and our conclusions as to the
losses that have arisen and their causes.
Our costs will reflect the considerable amount of detailed checking that will be required.
We appreciate the importance of establishing whether the problems at South Marine Drive
are peculiar to Mr Castleton or whether there are wider implications for the Horizon
system.
I attach with this letter and estimate of our time costs. The costs estimate is based on the
assumption that the Post Office can send us copies of computer files or documents and that
we do not need to visit Bridlington.
This estimate is based on our appreciation of the work that will be required. If indeed the
assignment takes less time than I have envisaged I will advise you and we will obviously
invoice our actual time costs. I do not envisage our costs exceeding this amount.
Early indications of problems with the Horizon system
We have found that there is some indication of possible problems with Horizon from our
initial review of the electronic information you sent us. You sent the transaction summaries
for January, February and March 2004. In theory the system should reflect the double entry
nature of each transaction, e.g. the system should show the sale of a stamp and the receipt
of the cash paid by the customer. Therefore the Horizon transaction entries for a period
(whether day or month) should total zero. From our initial review we can see that March
balances but January is out by £2.47 and February by £4.05. We have found which
transactions cause the differences and will investigate them in due course. Although these
are very small amounts they do indicate that some problems may exist i.e. that the double
entry is not being put through.
POL00081490_008
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BDO Stoy Hayward LLP Mr S Dilley
Bond Pearce
"caste
5 September 2006
An explanation of the Horizon system
As discussed on the telephone it would be helpful for Geoff Porter and Liz Padley, who
will be undertaking the detailed investigations, to meet someone from the Post Office who
can explain the operation of the Horizon system. Ideally we would want to have the same
understanding of the system that Mr Castleton as a recently appointed sub-postmaster
would have received in his training. Ideally this should be undertaken at an early stage,
before we start our detailed work.
It will also be useful to have a contact at the Post Office who can provide us with any
additional information we may need.
On the subject of the IT report I am in contact with my colleagues in our London office
and hope shortly to be able to arrange a meeting to discuss this aspect of our work.
Please let me know if there are any points you wish to discuss. Thank you again for your
instructions.
Yours sincerely
Michael J Mason
Director
Encl: time/cost budget
POST OFFICE v CASTLETON
TIME COST BUDGET FOR PREPARATION OF THE EXPERT ACCOUNTANCY REPORT
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MJ Mason G Porter E Padely
Director Senior manager Forensic senior Total
Hours Hours Hours Hours
Planning and initial review of papers 5 15 20
Comprehension of the system 2 5 15 22
Investigating work from Dec 03 to
end of week 03 120 120
Review of earlier peroid 15 15
Review of subsequent period 15 15
Preparation of report 30 30
Review of work and supervision 10 10
Liasing with IT expert 5 10 15
Total hours 22 60 165 247
Hourly rates £ 278.00 £ 278.00 £ 239.00
Cost 6,116 16,680 39,435 £ 62,231
G \forensic\CASESWond Peare\Post Office v Casteton\Budget and costs QO STOY HAYWARD
10:06 07/09/2006,