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JESA response issues — paper for BIS
Issues covered in this note;
Suspension and contract termination numbers
Update on cases referred by BIS
Follow up items from 4 November meeting between BIS and POL
JFSA submission to Postal Services Bill Committee and prospective POL
response
Next Steps within POL on the JFSA issue
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1. Suspension and Contract Termination Numbers
Jesse Norman MP (Hereford and South Herefordshire) (Con): Is my hon. Friend as
concerned as I am about the back-door closure of post offices, which Iraised in a
debate last week? I am enormously grateful to the Minister for recognising the
problem. He may be interested to know that, of the 2,406 audits that were done in
2009, 265 suspensions were held, and there were only two reinstatements after
appeal. That very much reinforces the picture that suspensions are being used as a
means of closing post offices, which I am sure is something that we would all
deprecate.
It is worthwhile seeing some more background to these figues — which related to the
period 1 January to 31 October 2009.
In that period there were 2406 audits and there were 265 suspensions as identified in
the Parliamentary quote.
Of those 265 suspensions, 64 were subsequently reinstated following the initial
investigations. A further 67 resigned to avoid termination. There were subsequently
131 summary terminations, 1 termination at 3 months notice and 2 reinstated
following appeal.
Therefore of the suspensions in the Jan-Oct 2009 period, 25% were reinstated, 25%
resigned themselves and 50% had their contracts terminated by POL.
If we consider more up to date figures for January to September 2010, we see 166
suspensions. Of these 29 have been reinstated, 37 have resigned to avoid termination,
30 cases still being considered. There have been 62 terminations of contract, 1
reinstatement following appeal and 7 cases currently at the appeal stage.
Therefore of the suspensions in the Jan-Sept 2010 period, 22% cases are still in
progress, 18% have been reinstated, 22% have resigned to avoid termination and 37%
have had contracts terminated.
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A final point with respect to Jesse Norman’s comments — where there is a termination,
it does not necessarily mean that the Post Office will close. Typically we will be
seeking to appoint a new subpostmaster to take over the Buisness — either at that
location or very nearby. Termintaion of contract refers to the subpostmasters
individual contract, it does not mean that we are seeking to close the Post Office
facilities in that location. Another subpostmaster will be typically sought and be
appointed to run services at the location concerned.
2. Update on correspondence referred from BIS
Jonathan Djanogly MP (letter to Ed Davey 22 October 2010)
on behalf of Mrs Jenny O’Dell, ex subpostmaster Great Staughton Post Office
In November 2009 Mrs O’ Dell contacted the internal helpline (NBSC) advising that
her branch had seen monthly losses of £1000 since May and the figure stood at
£7,000. Mrs O’Dell stated that she had carried out checks and had not received any
transaction corrections. She believed the Horizon system to be at fault so refused to
make good any losses.
Checks undertaken by the contracts team with the Chesterfield accounting team
confirmed they were not aware of any issues at the branch; no problems with
cheques/cash or ATM and that no losses had been settled centrally. There were no
losses within the last three trading periods so this raised the possibility that the cash
figure may have been inflated to cover losses.
On 9 December 2009 the contracts team wrote to Mrs O’Dell asked her to supply any
evidence to support Horizon was at fault. Mrs O’ Dell referred to a shortage of 16
December 2009 of £8,506 and subsequent gains on 17 & 21 December of £5,000 and
£7,000 but could not provide any evidence to support Horizon was at fault,
An intervention visit took place on 6 January 2010 to try and ascertain the cause and
extent of the losses and whether there was any fault with the system or incorrect
accounting. Following an audit Mrs O’Dell was suspended as a number of
discrepancies were found. Some examples are; multiple cash declarations added
together to hide losses; three cash declarations on the system totalling £21,000 but
less than £8,000 actually on hand; no losses in balance over 12 months but one
misbalance settled centrally; the branch trading statement of 30 December did not
show any Christmas stamps but there were 9,032 on hand. The total shortage at audit
was £9,616.66.
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Following her suspension Mrs O’Dell was invited to a meeting on 8 February 2010 to
put forward her reasons why her contract should not be terminated. The charge was
loss at audit and falsification of accounts. During the interview Mrs O’Dell was
accompanied by NFSP representatives. Mrs O’Dell admitted to inflating cash figures
in the Post Office accounts. Neither Mrs O’Dell nor the NFSP could provide any
evidence to suggest that the losses had been occurring over a period of time.
Mrs O’Dell was advised on 19 February 2010 that her contact was summarily
terminated and that she was required to make good the outstanding loss. She took up
the right of appeal, which was held on 30 April 2010. Mrs O’Dell was advised in a
letter dated 21 May 2010 that the decision to terminate her contract was upheld.
A separate case was also raised by Post Office Security to follow up the audit
findings. The registered staff at the branch was Mrs O’ Dell and her son Daniel
O’Dell. Both were interviewed under caution. Mrs O’Dell admitted to inflating the
official cash on hand to cover up shortages in the Post Office account and falsifying
branch trading statements. Despite Post Office Ltd being able to prove that more than
one cash declaration was being made, Mrs O’ Dell maintained the system was at fault.
An official caution was administered under Section I of the Fraud Act 2006, which
Mrs O’Dell refused to accept. The outstanding debt is currently being pursued via our
Civil Litigation team.
Neither Mrs O’Dell nor her son provided any evidence of or identified any specific
transactions which contributed to the losses. Post Office remains fully satisfied that
the Horizon system is robust and fit for purpose.
Jonathan Lord MP — Letter to Edward Davey 25 October re Mrs S Misra — West
Byfleet
In the case of Mrs Misra the case has now been before the Courts, and Mrs Misra was
found guilty after a full jury trial. She has subsequently been sentenced to 15 months
by the Judge taking all due regard to Judicial guidelines. It is probably inappropriate
to comment to the MP about the detail of the trial — although it is worth pointing out
that the Defence for Mrs Misra did utilise an IT expert with regard comments on the
Horizon system (the MP’s letter suggested that they wished to employ at IT auditor to
look at the case but the costs were prohibitive) and a clear decision was arrived at by
the Court.
Wendy Buffery — Up Hatherly
Background to this case as follows;
e Chesterfield noticed a pattern of unusual cash rises on Tues, Weds & Thursdays
e Following an audit of the branch on 11/12/08 an initial shortage of £27,776.63 was.
identified. £1,500 was later found, reducing the loss to 26,256.63.
e Mrs Buffrey told the lead auditor the main stock would be £20k short
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e Ather RTU interview on 21/01/09 Mrs Buffrey admitted that she had started to inflate
her cash to cover losses from May 2008 but that she had not taken any money for her
own use.
e During the sses occurred her husband had been taken “land
she too ha
e Mrs Buffrey raised no issues around her accounting difficulties with either POL or the
NFSP.
e It appears Mrs Buffrey went to appeal and the decision to terminate her Contract for
Services was upheld in March 2009 for falsifying accounts
° Post Office security took forward a prosecution and went to court in April 2010. A trial
date was given for September 2010.
e Aweek before the trial date, we were advised that Mrs Buffrey would be changing her
plead to guilty and produced a cheque for £26,256.63 - which was the amount of the
outstanding debt.
© On 18 October 2010, Mrs Buffrey admitted to one count of fraud was sentenced to a
42 month community order of 150 hours unpaid work.
Note: Although Mrs Buffrey stated she had not taken any money, she admitted to falsifying
accounts. No claims were made to challenge Horizon integrity. However, security advised
that Horizon was mentioned prior to her court date but after Mrs Buffrey’s forensic
accountants had gone through the reports her plea was changed to guilty. No evidence has
been provided to support that Horizon was at fault.
3. Follow up points from POL meeting with Mike Whitehead on 4 November
(subsequent to the JESA meeting with Edward Davey).
Points discussed at the meeting
- Whether the contract has changed since 1994 to reflect Horizon — The
Contract has had a series of amendments and associated operational
instructions which mean that it remains a proper legal and commercial
document with respect to the operation of a Post Office. There has been no
legal challenge to the appropriate nature of POL’s agency contracts
- Lack of audit trail for subpostmasters — subpostmasters can pull off a
transaction log every day and declare their cash at the end of the day. The
facilities are there for subpostmasters to track their own transactions should
they wish
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- POL can access the system remotely and make changes to it — this is not the
case. The system is based on a user log in, and all actions have to be endorsed
by the user. POL cannot remotely control a branches system.
- Frequency of software updates — these are normal operational updates such as
those that occur in any system. They do not indicate in any way any faults or
unreliability in the system
- Equipment moved from one branch to another. If equipment is moved from
one branch to another, it is fully refurbished before use and there is no
potential for past transactions in any way to remain on the system. As
previously advised — every transaction undertaken on the system is
independently recorded and maintained in a separate tamper proof audit log.
There is always therefore the capability to track back transactions independent
of the equipment on which it was undertaken
- Noregular audit systems — our audit systems are based on random choice and
on risk factors. Audits from the central team are not needed for the
subpostmaster to operate the system or to know where they are with their own
account. Subpostmasters can obtain a full transaction log, make daily cash
decalarations and can regularly balance their account. They have access to
phone help and personal visit in any cases of difficulty.
- Subpostmasters having to agree to a loss or can’t open the office the next day
—this is not the case. If there is a discrepancy in an account when it is
balanced, the subpostmaster has the option for ‘settle centrally.’ — this means
that they can roll the system over whilst the issue is being looked into. It is a
standard process which does not imply acceptance or otherwise of the
discrepancy by the subpostmaster. It is a standard part of the process.
- Processes for suspension and afterwards — The Post Office processes cover
the situation whereby the subpostmaster is made clear of the situation, has the
opportunity for interview, can be accompanied at that interview — and there are
clear rights of appeal once the decision is made (the attached document
summarises the situation). In cases where the Post Office Investigation Branch
is involved, the procedures followed within their investigation and interviews
are fully compliant with the relevant UK legislation. The attached note
explains further the credentials of Post Office Investigators (who would
always be involved in a case that involved prosecution).
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4. JESA submission to Postal Services Bill Committee
Memorandum submitted by Justice For Subpostmasters Alliance (JFSA)
(PS 14)
The submission comprises of:-
o Introduction — who we are and why we came into existence
o Aim — the objectives of the Alliance
o Background Examples — offers a brief insight into subpostmaster problems
relating to:-
o The Subpostmaster Contract
o Audits
o Suspensions
o Recommendations
Introduction
Justice For Subpostmasters Alliance (JFSA) was established during
November 2009. It is an entirely voluntary self-help group comprising of
mainly ex-subpostmasters, a smaller group of serving subpostmasters and a
number of professionals who are able to assist with their expertise. Since the
introduction of Post Office Ltd.’s (POL) Horizon system during the late
1990’s, many individual subpostmasters in isolation have endeavoured to
stand up to POL. Inevitably they have been crushed under the weight of their
power and their endless funds underwritten by a Labour Government that
allowed them to act with such impunity, This, when combined with the flat
refusal to confront POL over the failures of its Horizon system by the so
called representative body for subpostmasters, the National Federation of
Subpostmasters (NFSP), is the reason why JFSA has been formed. We are
still a small group with over a hundred active cases and roughly twice that
number of serving subpostmasters who are following our developments. Yet
our numbers continue to grow weekly as people discover JFSA and many
more subpostmasters fall victim to the vindictive and punitive actions of
POL. There is little doubt that when the true extent of the antics of POL are
finally exposed the victims will number in the thousands.
Aim
Our aim is to bring to the attention of those in power the abusive and
destructive manner in which POL have, and are still treating subpostmasters,
and to seek to redress the many injustices that we have been subjected to by
POL. We intend to highlight the miscarriages of justice that have been
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inflicted on subpostmasters by an organization that abuses its licensing power
to criminally prosecute without providing evidence in cases of a civil matter.
The systemic faults of POL and its Horizon system are too numerous and too
complicated to deal with in this brief submission. Though in order to offer
some insight into the points and recommendations that appear at the end of
this document, a brief outline of the background to some of these issues has
been included.
Background Examples
The Subpostmaster Contract
The Performance and Innovation Unit report of 2000, "Counter Revolution:
Modernising The Post Office Network" identified "The majority of sub-
postmasters still work under a contract which can be traced back a hundred
years". POL uses this contract, emanating from the Victorian era, to pursue
subpostmasters through the courts in order to recover POL’s losses from their
flawed Horizon system. Even with the introduction of the latest technology
POL still rely on clauses such as "a Subpostmaster is responsible for all
losses", originating from a contract from a time when the lighting was by oil
lamp and the ledger was completed by quill and ink. They use such clauses to
extract money from a subpostmaster, either from their salary or through the
courts, should their flawed Horizon system decides it is owed. System errors
are never considered (POL states it handles 2.4 billion transactions a year and
this is without a single error), only the contract is used to recover any
shortage. Yet the IT part of that system can be accessed and manipulated
over a network without a subpostmasters’ knowledge or agreement, but it is I
only the subpostmaster who is made financially liable. I
The few hundred Crown Post Offices left that are directly run by POL, they
also use this Horizon system and during the financial year 2007/8 these
offices lost £2.2m using this system, and whilst their staff are not treated as
guilty until proven innocent, a subpostmaster is.
Audits
POL refers to it as an audit when they descend upon a subpostoffice, but the
reality is, it is little more than a stock take, The POL staff that carry out these
‘audits’ can be anybody though we have yet to find a member of Institute of
Internal Auditors or any other professionally recognized body in attendance.
What makes them qualified to carry out an ‘audit’ of a subpostoffice? After
all they hold a subpostmasters’ future in their hands and the least you should
expect is a suitably qualified professional person to be involved, but they are I
not, and a subpostmaster is not allowed to bring in his own professional I
auditor to check the findings.
Then there is the matter of POL and their total failure to undertake routine
‘audits’ of subpostoffices. There are subpostmasters who have never had an
‘audit’ in eight years and post offices which turn over £5m every year that
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have never had an ‘audit’ for over 5 years, and they have to use Horizon, a
system they are unable to gain full access to in order to check all the
information they have entered into the system. Yet they are being held
responsible for the accuracy of everything during this period.
A question often asked is why does POL not ‘audit’ all subpostoffices on a
regular basis? Many people believe that they are well aware of all the faults
in Horizon and the more post offices they ‘audit’ the more these faults will
become apparent. After all, from the POL standpoint they don’t have to
undertake ‘audits’ as they can rely on using the contract to pursue
subpostmasters through the courts or deduct money from their wage packets
to recover any shortfall due to whatever reason.
Suspension
Should a subpostmaster begin to have problems and then find themselves
suspended, they soon discover they have nowhere to turn to for support.
Their salary is stopped instantly and they are treated as being guilty from the
outset by POL. There is no independent adjudicator you can apply to, POL,
act as judge, jury and executioner in all matters. The National Federation of
Subpostmasters, the so called representative of the subpostmaster have taken
the decision that Horizon faults do not exist as POL has decided it has to be
that way. When POL requests the subpostmaster to attend an informal
interview they are not even permitted to take a solicitor, partner or anyone
with them other than a Federation representative who is then not allowed to
say anything.
The few examples given above really only scratch the surface of the
problems facing subpostmasters trying to offer a service to their community.
Through JFSA we will continue to raise these and many other points.
Recommendations
Regardless of the direction which lays ahead for the Post Office, there are, at
the very minimum, a number of issues which should be addressed and
included in any way forward.
o A full and complete independent IT audit of POL systems and support
should be undertaken with its findings made public.
o An external independent adjudicator should be appointed to review cases
and issues between POL and subpostmasters. The adjudicator should have
the authority to demand documents from both POL and the subpostmaster
and should be assisted by a team of skilled technical staff who are able to
gain access and check any system or document that they deem necessary.
o A new subpostmaster contract should be produced to replace the Victorian
template still in use today. Above all, it should reflect the introduction of new
technology and address in detail where responsibilities, liabilities and
boundaries lay. It should ensure that there is full and easy access to the
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records of transactions that a subpostmaster is being held liable for during the
full term of that liability.
o There must be a legal or a contractual requirement for POL to undertake a
full audit of all subpostoffices at least annually and by qualified staff.
0 The licence to prosecute should be removed as a tool from POL and any
prosecutions should be referred to the Crown Prosecution Service.
o Any external access to a subpostmasters Horizon terminals over the
network should be accompanied by an automatically generated system log
entry recording the details of the event which is then made available to that
subpostmaster.
November 2010
©Parliamentary copyright Prepared 17th November 2010
POL Comments, if requested, on the JFSA Memorandum to the Bill Committee
Post Office Ltd does not accept the unsubstantiated allegations that are being
made by JFSA — a small self appointed group which, by its own admission,
consists mainly of ex-subpostmasters. The Horizon system has brought major
benefits to subpostmasters and customers and carries the full confidence of the
NFSP and the CWU who represent serving staff and subpostmasters who use the
system throughout the Business. It should be noted that all subpostmasters are
able to obtain their own transaction log from the system and conduct a daily cash
declaration — thereby being in a position to fully understand their own accounts
within the system. In addition the system also creates a separate independent
audit file of every transaction performed. The subpostmaster is always in full
control of their own account on the system — the system cannot be operated
remotely by Post Office Ltd in any circumstance.
The commercial contractual position between subpostmasters and Post Office
Ltd is well established and both its content, and the way it is applied, is
compliant with, and subject to, all relevant UK legislation. The contract is fully
recognised by the National Federation of Subpostmasters (NFSP) and any
amendments or changes to the contract will typically be discussed with that
representative organisation. Should a situation arise whereby Post Office Ltd
seeks to end a subpostmasters contract, processes are in place whereby the
subpostmaster involved can put forward their case, can be assisted in doing so by
the NFSP or by a friend, and the subpostmaster also has a subsequent right to
appeal any decision made to a separate appeals authority within the company
which will look at the case afresh. Of course, as independent business people, all
subpostmasters also have access to the UK legal system should they believe that
Post Office Ltd are acting inappropriately. The results of individual cases that
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have come before the Courts do not indicate that Post Office Ltd’s systems or
processes are inappropriate.
The future development of contracts and associated processes affecting
subpostmasters is a matter that would be discussed between Post Office Ltd and
the National Federation of Subpostmasters to help ensure that the interests of
subpostmasters are represented.
5. Next Steps within POL on the JFSA issue
POL will continue to insist that the Horizon system and accompanying processes
are fully robust and that the JFSA are persisting in making unsubstantiated
allegations. The cost and disruption to the Business of following the JFSA
recommendations would be very high and could damage the sustainability of the
network. Given the unsubstantiated (and inaccurate) basis of the
recommendations that JFSA are making, this would be an irresponsible course
of action for the Business to take.
Looking forward, as part of its future strategy and the development of its
Business, Post Office Ltd will be reviewing its contracts with subpostmasters
consistent with the Policy Statement outlined by Government in November 2010.
It will be doing this in conjunction with the National Federation of
Subpostmasters, and this process will continue to ensure that the contractual
basis and associated procedures between Post Office Ltd and individual
subpostmasters remains sound, fair, commercial and appropriate. It is this
process, plus the backstop of the legal system should any cases be referred to it in
the meantime, that can assure BIS that the stance that Post Office Ltd takes to
subpostmaster contracts and processes looking forward is fair and reasonable.