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From: Mark Underwoud! £
“Fo: Mark, Uaderwau
is
Subject: FW: Second Sight now fini meeting 25 M
Dater Tex. 13 Oct 21S LG: bR4? -0R00
impertance: Noval
From: "WALKER. Janet’ 7
ht note from meeting 28 March
Thanks for this. Jarnes was very keen his email reach you swiftly, He is in the process of
reviawing my noke, which supports his recaflection. You are welcome to call me to discuss, but if
you wouid prefer to speak to James, please fet re kr. Parllanvant breaks for Recess tonight, i
and it may be slightly tricky trying to pin him down to a time fora chat until 1 acesak to hira
tamorrow.
Kind regards
Jaret
Jarost Weikeey
Offic of the Ri How dares Arbatines
MP for North Cast Hasgyshire
fhomse of Comencne
London SWEA BAA
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From: Aiwen Lyons Eaiaitabvendyens!
Sent: 26 March 2013 17:18
Fo: WALKER, Janet.
Stabject: PW: Second Sight pute frors meeting 25 March
Sensitivity: Confidential
Aesxent
Thore segras came confiesun here, Does your pote of the mesting help clarify.
Thanks
Afwoen
From:
ARBUTHNOT,
James
Uonaittan
Sent: 26 March
2013 15:44
Tox Susan Crichton
Ktymmalisenyes Ces Alvear Lyons;
Stght aete fron
meeting 25 March
Sensitivity:
Confidentiat
fear Sasa,
t have had sight of lan Henderson's email te you following the meeting held ut Westrinster on
28 March. 1 would be grateful if you would forward this message to Ruth K. Barker and Mark &.
Davies, neither of whorn is known to me, nor do 1 have thelr emall addresses, but as they were
inchided in the initial circulation, I feel they ought to be able to read my resporae.
The reason Tam writing ix that my recollection of the mawting is somewhat different ty his. 1
plan to circulate the note my office made of the muemeting in due course, but please would you
note the following oamments from me (in red), which refer directly tu Jan Nencdersan’s points in
the email he sent te you, copied betow,
. There was broad support for the concept of reporting on issues rather than individual cases ~
rather than ‘support’, T think [would axpress this as ‘unclerstanding’. MPs will, in the end, wart
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te know how their individual constituent’s case conclixtes, and whether it can be stated that their
constituent has been wrongly accused,
. The MPs want Second Sight to report on a much wider range of issues in July than we had
planned i.e, not just the Horizon transaction issues. A consequence of this is that any report in
July will be an interim not a final repart ~ this is not my recoffection of what was discussed or
agreext at the menting, Although the peasibility of a July meeting was mooted, and the possibility
that the report that might be presanted at that meeting might be interiry in nature, no desire far
8 wider range of issues ta be reportucl on was reantionad by MMs,
. There was broad support for the proposal to run a serias of tests in the Madel Office replicating
the specific scenarios reported by SPMRs ~ this was not mally discussed. What I heard was that
the Mode Cvfine was offered to Second Sight ax a way te fest processes and the systern by the
Fost Office, but ne mupress support ~ or iack of i -- for its use was discussed or agreed,
. Alan Bates reported that a significant number of SPMRs had not accepted the JFSA / POL i
agreement and remained concerned about possible retribution from POL. This has resulted in :
under reporting of cases and issues. (This was the first time we had been tald about this) ~ this
ig true, f wes rather irritated thet Alan Gates raised this withoudt warning, are did so pulslicly.
. MPs (and JFSAS reported continuing concern abaut “heavy handed! audit and investigations
processes and the inability within POL to differentiate between genuine issues of concern
reported by SPMEs compared with suspected fraud or theft. This is causing real hardship
to SPMRs and may lead to suicites, (This was mentioned more than once) ~ this was the view:
coming from the IPSA, not MPs. I do not recall arey nearing: of sulekdes at the meeting, hut IPSS
did raise the point that POL contirsass ewan tadey to prasmaute allegations of theft without the
prior investigation or the tentativenesa that this investigation would suggest might be necessary,
MPs were pleased to note tru: personal involvement of Alice Perkins and Paula Vennells but
would like this to be extended within POL te a much more sympathetic attitude to SPMRs with
problems. They felt internal communication processes within POL were not working well. There
was universal concern about the continuing use af comments such as “we have total confidence
in the Horizon system” which are cortrary to the experience reported by a number of SPMRs ~ I
am unhagpy with tes way this is expressed. There was no expression of any views from MPs or
their representatives about internal ourmmunications wittiin the Post Office, nor that the personal
involvernent of staff beyond senior management ought to be exherwied. That the Post Office
continues to clair confidencs in Merizon is factually correct, arid } emphasized that unt cases
were put te the Post Office which undermined this confisterice, the Post Office's stance was
. in the fight of the issues now being laaked at by Second Sight, POL should consider a suspension
of aff current prasecutions activity until after July at least — this was not specifically discussed at
the restirag, but it may well follaw frarn the poird i make at 8 above.
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There was widespread support for the view that it is essential the investigation cantinums to be
supported by POL as it was felt that this is the best opportunity ta really dig into the issues and
concerns reported by SPMRs ~ as above, a good maint. There vers, heavaver, commern that the
matter was going on so iong and costing POL a lot,
ray mind, the meeting want as well as could be expected. [ would not go ao far as to support
opition that ‘extensive concern’ was expressed abuut the investigation and prosecution
processes the Past Office is following. My impnessia is that by and large, we listened bx what
was Ieing presented te us by Second Sight. Mike Wood and Kevin Barron certainly did mount
sare robust questioning, as they should, but to shape this ay “extensive concur is stretching
Shings @ bit, I thick,
i shaft cireulate my briefing in due course, out vould be grateful If you wraudd nobe my comments:
shove.
Yours evur,
Jarvss
Cifice of fee Ri Hon James Arouthiot, AF
House uf Conunans
Londot Gai & Ga
Website: gave Jatmesarbuthnot cont
Prose: lan Henderson {maltesd
Sent 25 March 2613 $8.25
Fos Susan Crichton’
Ce: ‘Alveen Lyons’; ‘Simon Baker’; ‘Ruth X Barker; ‘Mark & Davies’; “‘corarrinar
Subject: Meeting with MPs ~ 25 March 2082
Sensitivity: Confidential
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CONFIDENTIAL
Susaa
The mectiog with MPs went reascnably well, however there was robust questioning from a uuniber of
MPs, particularly Mike Woud MP aad extensive concern expressed about POL, investigation and
prosecutions processes. Janet Wafker will he circulating en offivial minute of the meeting in duc course.
Whilst Shousnithe were present throughont, they took no part in the meeting areal did out conusent at any
pobat,
attach a copy ofthe Seeond Sight Briefing Note that was tabled at the meeting
Headline points from the meeting were.
There was broad support fur the concept of reporting on issues rather than individual cases
‘The MPs want Second Sight to report on a much wider range of issues in Joly thae se had planned ic. nt
just the Horizon transaction isms. A consexpience uf this is that any report in Joly will be an interies not «
*
final report
There was broad support for the proposal to ren « series of tests in the Model Ciffice replicating the
specific scenarias reported by SPMRs-
Alan Bates reported that a significant mumber of SPMRs had not acoepted the JFSA / POM. agreensent and
remained concemed about possible refabution from POM. This has resaited in nader reporting of eases and
issues. (This was the first time we had been told about this)
MPs (and JESA) reported continuing concern about “heavy handed” pudit aod investigations provesses
and the inability within POL to differentiate hetween gennine issues of concem reporicd by SPMRs
compared with suspected frasd or theff, This is cassing real bardsbip to SPMRé and may lead te suicides.
(This was mentioned more tan onee}
MPs were pleased ic oate the pexsunal javelvement of Alice Perkins and Paula Vennells but would like
this to be extended within POL to a much more symputhetic attitude ta SPM Rs with problems. They felt
intersal conmpunication processes withia POL were not working well, There was universal concern about
the contisuing use of corpments «ach ns “we bave total confidence ia the Horizon system” which are
contrary to the experience reported by a sermber of SPMRs
In the light of the issues new being looked at by Secund Sight, POL should consider 3 saspession af all
current proscautiogs sctovity antd after dy at beast
There was widespread support forthe view that it is essential the mvestigation continues to be supported
by POL as it was felt that dus is the best opportunity to really dig into the issucs and concerns reported by
SPMRs.
{wil eirealat: Janet Walkers note of the meeting as soon as I recive #
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WITH best wishes
fan 8 Rendersen CCe CESA ECA
Advanced Forensics - Lord
Forensic computing expert witness and edectronté @isciosure apes imi ist
Uk Sabsie:
fmeil. diets
Website: Rite. (datvancedforensics..com
Linkedin: Wika: /inkegin.com/in/focensiceud
Totter: Nitms detwiecer .com/ forens Legos
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Frome Mark Underwood! [
fo: Mark Underwood! 1
Subject: FW: Second Sight note from meeting
Bates Tue, 13 Oot 2015 164d +G0D8
Engprortange: Normal
From: "WALKER, Janet”
Date: 26 Moreh 2013 17.3
Tax Alwer Lyons:
Subject: RE: Sevan Sight note fram meeting 38 Mareb
Hi Alen,
Thanks for this. James was very Keen F
reviewing my nob, wi
you would prefer to srach
may be slightly tr
SOR RGF,
is eniail reach you swiftly. He is in the peacess of
‘ou are welcome te call me to discuss, but ff
hnoww. Parliament breaks for Recess tonight,
to nin hirn down to a time for a chat urdil I speak to
Kind regards
Janet Walker
iw af die Ri Hos Rane Avkadnst
DMP fer Ne
with Ba
Hanipshiee
Pinte of Comamene
Lorin: SWLA G84
sew jamemacharhoot com
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From: Alwen Lyons (routiiouven. I
Sent: 26 March 2013 17:18
Tos WALKER, Janet
Subject: Pw: Second Sight note from meetiny 28 March
Sensitivity: Confidential
Janet
Phere goemts sanie ccady
x, Tass yarit mote of the owchiog help clarity
Set 1G March
2033 15:49
To: Susan Crichton
Cex Abyen Lyons;
Simos: Gaker; lan
Hendersan; ‘Ror
Warmington’
Subject: Seoomt
Sight pate from
meeting 25 March
Sensitivity:
Confidentiat
T have had sight of lan Handerson’s erreail to y: wing the rneeting heii et Vstrinater cre
25 March. J would bs grateful if you would forward thig massage to Ruth %. Sarker areal Mark &.
Savies, neither of whont is Known to mia, nor do T have their email addresses, fut as they ware
inclucled in the inftlal circulation, 1 feel the i ins able te rea:
The reason I arn writing os that my recollection of the meeting is sormwhat different te his. 1
plan to cinnulate the nate ry office made of the meetiry due coursd, bat olsase eould you
note the following cormments from nu (it red}, which refer cinectly te lan Mareersan’s points ir
the arnail he sent to yeu, coped batow.
. There was broad support for the concept of reporting on issues rather than individual cases -
rather than ‘support’, I think I would express this as ‘urlerstacing’. MPs vill, in thes end, wars
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to know how their individual constituent’s case conciudes, and whether it can be statecl that their
canstituent has been wrongly accused,
. The MPs want Second Sight to report on a much wider range of issues in July than we had
planned i.e. not just the Horizon transaction issues. A cansequence of this is that any report in
July will be an interim nat a final report ~ this is not ney recollection of what was discussed or
agread at the meeting. Although the pesaibility of a July meeting was mooted, ard the possibility
that ites report that might be presented at that meeting might be inturim in nature, no desire for
a wider range of issues to be reportert an was mentioned by MPs.
. There was broad support for the proposal to run a series of tests in the Model Office replicating
the specific scenarios reported by SPMRs ~ this was net really discussed. What I heard was that
the Model Ciffice was offered to Secend Sight as a way te test processes and the system tev the
Post Offine, but no axpress support - or lack of 8 ~ for ies use was discussed or agreert
. Alan Bates reported that a significant number of SPMRs had not accepted the IFSA / POL
agreement and remained concemed about possitie retribution from POL, This has resulted in
under reporting of cases and issues. (This was the first tinve we had been told about this) - this
is true. 1 was rather irrituted that Alun Gates racsad this without warring, and did se publich
. MPs (and JFSA) reported cantinuing concern about “heavy handed” audit and investigations
processes and the inability within POL te differentiate between genuine issues of concern
reported by SPMRs compared with suspected fraud or theft. This is causing real hardship
to SPMRs and may fead to suicides. (This was mentioned more than once) ~ this was the view
ceming from the IPSA, not MPs, Laie not recall any mention af suicides at tire meaeting, but ISA
did raise the paint that POL continues even today te prosecute allegations of theft without the
rior investigation or the tentativeness that this Investigation would suggest might be necessary.
. MPs were pleased to note the personal involvement of Alice Perkins and Paula Vennelis but
wauld like this to be extended within POL to a much more sympathetic attitude to SPMRs with
problems. They felt internal communication processes within POL were not working well, There
was universal concern about the continuing use of comments auch as “we have total confidence
in the Horizon system” which are contrary to the experience reported by a number of SPMRs ~ f
am unhanay with the way thi grassed. There eas ne expression of any views from MPs or
their representatives about inte: communications within Bre Post Office, nor that the personal
invelvernent of staff beyond aenior management ought to be extended. That the Post Office
continues to claim confidence in Marizon is factually correct, and I emphasiged that urdil cases
were put to the Post Office which uncermined this confidence, the Seat Office’s stance was
understandable,
Ts the light of the issues now being looked at by Second Sight, POL should consider a suspension
of ali current prosecutions activity until after July at least ~ thi was not specifically discussed at
the poesting, but it may well follow fram the point f make at $ above.
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. There was widespread support for the view that it is essential the investigation continues to be
supported by POL as it was felt that this is the best appartunity to really dig inte the issues and
concerns reported by SPMRa ~ a2 shove, a gend soint. There was, however, concern that the
nutter was going on so long ard costing POL 3 fot
Yo eyy toed, thes inebng went as well ax could be s»pecied. I would not go so fir as to support
IvG CONCEP WAS Oxpr es: vestigation and grosecution
somex the Fost ¢ fotlowing. My inipres istened to what
WAS heing presented to us by Second Sight, bike Wood and Kevin Barron certuindy did mourit,
gone robuatl questioning, as they shed, but to shape this as ‘eytensive concer’ is stretching
things a bit, 1 think,
i shall circulate my briefing iv due course, tut wraild tee grabeful If you would note my carnments
abeve.
Yours ever,
James
Office of the PY Hon dames Arkattenet, SP
Hause of Convnans
Landen SYR DAR
Fram: lan Henderson £:
Sent 26 Maret 2093 WIS
Ta: “Susan Crichton’
Cex ‘Alwar Lyons!) Simon Baker’: ‘fasth X Barker’ ‘Mach & Davies's ‘neannioat
Subject: Meeting with MPs - 25 March 2013
Sensitivity: Confidential
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CON FHGEDI TIAL
Sagar
The nwctiag with MPs went reasonably well, however there was robust quesvomsg from a number of
MPs, particalarly Mike Wood MP and extensive concers expressed about POL investigation and
prosecutions provesses. Janet Walker will be circulating an official atinute of the meeting in dae course.
Whilst Shoosmiths were present throughout, they took 1 part in the meeting and did cet compent at ary
port,
Lattach a eopy of the Second @ Note that was tabled at the soceting,
fvadline points from the mevting were:
There svas broad support for the convept of reporting on issues rather than individual cases
‘The MPs want Second Sight to report on o mich wider range of issaes in daly than we had planned ic. net :
just the Horizon transaction issttes. A consequence of this is that any report in Addy will be an interin: not «
final pepart
There was broad support ioe the proposal to ran a series of tests in the Model Oflive replivating the
specie scenarios reported by SPMRs
Alan Bates reported that a signiivant aurabor of SPMEs had act accepted the JPSA / POL, agreement and
remained conecmed about possible retritasiinn front BOL. This has resulted in under reporung of cases and
issues, (This was the first haw we had beer tohd shout thus}
MPs (and IBSA}> ceported contiouiog coscern shout “heavy banded” audi and investigations processes
astd the inability wiflie POL. to differentiate benween genuine issues of coneom reported by SFMRs
comapared with caspeotad fraud or theft. This is causing real hardship « SPMR« and may lead to suicides,
(This eas oextioned more than once}
MPs were pleased te sate the poronal involvement of Alice Ferkine and Paula Vormells but wostld tke
this to be extended witha POL. to a mach rears sympathetic attitude to SPMRs with probierns. They felt
Hremal communication processes widan POL were not working well, There was universal concern about
the continuing use of comments such as “we have tote] confidence in the Hesizot system” which are
y to the experience reported by a number af SPMEs.
cunt
Jn the light af the issues now being looked at by Seound Sight, POL should consider a suspension of al
current prosvoutions activity antil after Joly at least
‘There was widespread seppert fer the view that it is cseential the javestigation comiames to be supported
by POL as it wus felt that this is the best appornmity to really dig uito the isases and concerns reported by
SEMRs.
Twill cirmdate Janct Walkers note of the meeting as soon as Ereceive i
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Las & Henderson CLE CISA FoR
Advanced forensics - Lendan, HK
Forensic competing expert witness aid electronic distlusure specialist
UE Bobite:
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#269.1
Metadata
Fiemme 5 3 FW Second Sight nate fess stings 28 8
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Giesiy Mr Aphaathniat,
weak, 1
ok frome the
sans, Aldexuedy fret Mee ref Sigy
Oe treated ae art acta? ¢
ay be few
fly gaier
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3 Coy
of Bova,
sAaKY ¢ The syste ee chee hy
Seestities sand there 2 resolving
these is set eb
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any say, Goth t BAS S38
ah a OTE COME ist of the aysterne faith
He ng Roiw the: whe is
CARY a watts damaue Hae
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2 han anough eviderios of the syshenic falures of Post Office and Nude Mor
yhuacion use of thelr ro Yet 2 has been Govern
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#94.1
Metadata
154 Alan Bates to JNA 1 Andi 2013)}pdf ORIGINAL]
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Bronu The Ri, Hoe. James Arbathnet, MP.
4
HOUSE OF COMMONS
LOWEN GHIA OKA
16 April 2043
bir Alan Bates
3 Bad Eien
Uandiian-ny-Rhos
Thank you for your letter of 1 April, Parliament has been in Recess and T have only just
retumed ta Westminster, so have not had the opportunity te read your thoughts about the
meeting last month,
ety sorry indeed that you are clearly discontent with how the investigations are
proceeding, in my diecussions with both Second Sight and the Post Office, I anverstoced that
fiers evidence of any failures inherent in Horizon is yet to be found in any case the
invent have thus far undertaken, In my fast disnussion with the Fast Office, the
hi it very clear ta me that no such evidence had been offered ta her. Untl it is,
the Post Gffice has nu nzason to adnilt that systeniic failures exist, I do cot believe that the
Past Office is being afforded any specia! or sensitive treatment; {t is simply legally untenabie
that such an admission ought to be made untif such evidence is produced,
I shall ask the investigaters again if they have such evidence, but I would also be grateful f
you might let me know what it is you helleve hus been found that cun he regarded as such.
i should then put this to Secund Sight and aak for their opinion,
The explanation that Serond Sight offered me as toa why they clfer only thernatic
conchisions te thelr investigations thus far rings true to mie: the volunie and complexity of
barkgrournd date relevant to every case is making analysis aod investigation an
extraordinarily tire-consuming process, What I have suggested tu the investigators is tat
they lake the two cases which are most likely, in their op! result which does
unwarth the kind of systemic failures you claim, and pursue these first, giving MPs a result,
perhaps even only a prafiminary one, by Sarnrner,
visa busthen ot sont
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Twwould point out that the Past Office is being helpful in cont
investigations, 1
feelings toward
ng to fund th
. Ne matter what one’s
Lagree with you that the result of every case is extremely inmpoctent ta avery
as an MP of one ef these, [toc am looking forward to the proness we have
flow through tt a reauit specific to her,
Finally, Janet me you called this moming shout two matters. The first, that Second
Sight be offered a copy of yx is absolutely fine, In fact, it would be extremely
heipfail to me by have their commmants on what you say, and T ant asking thern for that. The
second, regarding the request to extend the budget to allow Kay tu continue her wark is 4
matter you will need to discuss with the Post Office,
i hope this is aff helpful, and thank you far letting me know your thoughts.
VI
[rep beget 2
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Metadata
[Filename [5.5 Arbuthnot response to Alan Bales 16Apni2013¢) pq’ ORIGINAL }
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Justice For Subpostmasters Alliance
Jo Swinson MP Alan Bates
Minister for Postal Affairs 3 Bod Elian
Department for Business, Innovation & Skills Uanelian-yn-Rhos
i Victoria Street N Wales
LONDON LL29 8UY
SW1H OET
17* April 2013
Dear Minister
Tam writing to you on behalf of the Justice For Subpostmasters Alliance (JFSA). In the
past I have written to your predecessors Ed Davey and Norman Lamb over the issues that
have been taking place between JFSA and Post Office and their Horizon system.
Tam sure your department has enough documentation on the issues we (JFSA) are
concerned with in order to provide you with background material. Previously a reference
number 213102 has appeared on correspondence, At the meeting I had with Norman
Lamb at the end of June last year we briefly discussed the then current proposal a group
of MPs had made for an external forensic accountancy firm, 2 Sight, to investigate a
number of the claims that their constituents i.e. subpostmasters, had brought to their MPs’
attention. The Post Office were to be involved and they would fund the exercise, but
when J met with Mr Lamb I expressed JFSAs’ very real concern over the independency of
such an investigation, yet confirmed we were prepared to engage with the exercise if we
could obtain assurances that it was to be a genuine investigation. I also had given an
undertaking to Mr Lamb that I would keep him informed of the progress and refer any
concerns we had about the veracity of the work of the investigation,
It took until late December 2012 for JFSA to finally agree the terms with all the parties
involved, at which time we offered considerable assistance by providing information and
cases to the external investigations firm 2™ Sight. JFSA also acted as a central contact
and clearing house for cases that were raised by serving subpostmasters throughout
January and February of 2013. During this period we worked very closely with the
Investigators, who were not only taking the cases we were sending to them but also were
accepting the constituents’ cases from the MPs involved.
On March 25th 2013, a 1 hour meeting was held at Portcullis House. The meeting had
been arranged for 2 Sight to report to the MPs who attended on the methodology of
thelr investigation, and the areas they were proposing to include in the report that is due
to be completed by mid-July 2013. I was at that meeting and I was accompanied by the
JFSA forensic accountancy expert who has a watching brief on the Investigation work
being carried out by 2" Sight.
I have now reached the main reason as to why I am writing to you at this time.
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What 2 Sight presented at the Portcullis House meeting was a very real source of
concern for both the JFSA expert and myself. We were shocked at the direction this
investigation was being held to follow despite all the evidence that had appeared since it
began. Whilst we appreciate that this investigation would never have come about without
the support of the MPs, who rightly want the cases of their constituents investigated, so
much more has come to light and there seems to be considerable reluctance to broaden
the terms of reference to incorporate this information,
While every individual's case is extremely important to that individual, it is also doubly so
in the weight that it adds to the systemic failures within Post Office and their Horizon
system. These are issues which we at JFSA have been raising for years, and having
worked closely with 2 Sight over the last few months, we can see that they too have
independently arrived at the same conclusions through their analysis of the cases. What
has become evident is that these major systematic failures within Post Office and their
Horizon system have undoubtedly led to many miscarriages of justice. These systemic
failures are now proven facts, and are at the root of most of the subpostmaster cases.
Yet we cannot understand why 2" Sight were so reluctant to bring the systemic failures to
the fore at the Portcullis House meeting, or why the focus of the investigation has not now
been centred upon them.
From the outset, we had voiced serious concerns that this investigation would not be
allowed to present a true picture of what has occurred in the past or what is still
continuing today. We have always known that any investigation has to be truly . '
independent and able to work without hindrance or constraint, yet although we thought
we had assurances of this in the beginning, we have little faith that this is the current
position. Put simply, the way It is heading there will be no merit to any report produced,
as JFSA will not only fail to support it, but will challenge its’ findings, using evidence that
the investigation has already uncovered.
1 don't think it would be helpful to include a list of the systemic failures here at this time,
suffice it say that there are probably an initial 10-12 items that have been at the root of
many of the problems that most of the subpostmasters have been affected by. Both our
forensic accountancy expert and I would gladly meet with you to briefly go through these
issues if you would find it useful for us to do so.
For years JFSA has been campaigning for a totally independent inquiry to be set up by
Government to investigate the failures within Post Office and their Horizon system, the key
word being independent. This current investigation being funded by Post Office with the
investigators reporting directly to Post Office on a weekly and at times daily basis, and
where the direction of the investigators work is being channelled, will struggle to live up to
any independency claim once the report is published.
There is no doubt at all that the systemic failures identified so far have been brought to
Post Offices’ attention through their regular meetings with 2 Sight, and this alone raises
the question as to why Post Office is continuing with their prosecutions of subpostmasters,
when it is now so much more obvious that they are standing on very shaky legal ground.
As I have mentioned before, these systemic failures are proven facts which are at the root
of many of the subpostmaster cases, although from the 2” Sight briefing document
presented at the Portcullis House meeting, they are only going to be treated as an adjunct
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to the issue of the individual cases, to the point where only a few of them may be
featured in their forthcoming report.
It is evident to us, that these systemic failures should become the yardstick that the
individual cases are measured against, as they are significantly easier for others to
comprehend without the requirement of an in-depth knowledge of the finer points of
Horizon. The refocusing of the investigation on the systemic failures would not only offer
a quicker and far more efficient method of addressing the whole issue but would minimise
the information required from Post Office, which has been the main cause of the slow, and
at times no, progress, 2m Sight has made with the individual cases.
I believe it is important that you and your department are made aware of the current
Position with regard to the investigation, and if you would find it useful I am willing to
meet with you to go through the issues in more depth.
Please jet me know if you require any further information.
Chairman, Justice For Subpostmasters Alliance
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Filename [5.6 Alan Bates first letter to Jo Swinson 17 Apni 2013(1).pdt LORIGINAL]
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CMS Cameron McKenna
Attendance Note
Henk: Fost Office Limited
Matter: Horizon - Sesund Sight Inteam Report
Fite Namber: §
Foe Karner:
‘Type of Attendance: omal meeting at Houses of Parliament
Date 8 duly 2088
Attending
dames Arbuthnot OFASIP'S began by saving that the way be proposed the meenng shoukd go would be:
i «esuunmary from Second Sight of the report done;
2 brief communts fram 4 kin Bates IFSA and Ray Linnell (SA's appomted forensic anocuntant}
on the report: amd
3 then open ap for questions.
JAMP suit that in this mecting there are also observers from various badies, including: Mike Whitehead
from BIS, two observers troar POL. JAMP said that the observers were put here to be bartered with
prestives. They were here to make sure that these whe are i positions of awherity are hilly apprised as
tothe various discussions.
Also bt atioralarice vers bm Henderson und Kon Warmingion from Second Sight. Tadge Channer irony
Shoosnrltis, and Janet Walker, who is working with JAMP.
IJAMP fivst began the mecting by saying that he wand ke to thank PEM. very mauch for supporting and
thading the review. Thanks alse to POL for beng open and for finding @ light to shine on the issues, He
alee ixeacd thanks, particularly, t Second Sight. to lan Henderson and Ron Warmaington, for their gern
report. ffe afsn thanked Alun Bates and Ray Linnell for keeping an eye on Second Sight, Thanks alse to
Tadge Channer and Shoosmiths her the comritatiun to keep light burning where things were going dark.
Second Sight began their report, They explained the stricture af the report and explained that they began
by discussing what was ment by the teem “Horizon”, and whether if was jast the softears and the code
being reviewed or the totafity of the evstems, incfading the raining and the operational processes. It soon.
became clear that they needed tp look at the tofality of the user experienee. The also foaked at how POL.
investigated cases which sere bronght to their attention.
Ta section: 2 they explanied their approach to consider 29 cases which came te: them through te MP rene,
and 18 sheough the JFSA.
Section $~ As soon as they started 4 fact nacking review, if hecanie clear thas i would be important te
adope tee approach of 3 Spot Review, an iavestigation within an invesigation. This was designed to be
self-contained and te focus or ar issue if scope and the relevant remit, Some cases would neqeite
mltipte reviews and some single.
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Receaxd Sight were pleased af te relaticaship and the iavelversert with the IFSA (section 4),
Coramtents on fin Spot Review aad responses from POL ~ sectios $. Tt was made clear that POL. were
eotremely capportive of the nevestiganon. This as probably somwihing they were not ased te, particularly
the volume and the range of questions. There were, however, same criticisms of the POL reapunses. fo.
particular, Second Sight were given aaswers based 68 Standard Operating Procedures and Cantrals, eather
than evidence of what actually happened.
Seciwm 6 « This section identifies whesher defects in Horizon cansed some of the tasses abont whet the
SPMRs made crmmplaint, There was still maxch work felt, afthough Second Sight kave breally conshesled
with regand to the wider aspects af Horizos.
of the four Spat Reviews, ave involved cogcems abent the operation of Hinze in the sease of the
wider user esperienve These are SRE and $R22
There was a potentially signifioms fhubing or rather disclosure by POL, relating to defects nt the software
swhich are desuribed an: section 6. However, it seems that this was quite narrowly contained in the sense
thet it iowpacted a relstively amall eumber of branches, but took time to discover and correct,
Section ? - There are a nether themes involving gomunon issues from aadple SPMRs. The last itent
listed, item (), does not feature in the profiminary conchision because a is outside the supe af the terars
of reference. However, Second Sight did fvel that dis contract botweet SP Mis and POL wansfirred:
commiersial risk sa the SPMRs, inclading in relanon w changes, which would resale in a benefit ic FOL.
hut increased the Likeliboud of increased risk tor the SPMR». Second Sight felt that the balance benweon
the to of ask aud coward shoutd be looked into, although sot by Second Sight.
Sevtion 8, prelirsinary conchisions ~ Second Sight identiticd. potential problems in the way ia which PUL.
deals with peoblears whick arise aad which are set out in section &.2¢a}(1). Two of these were
hinhlighted it partiondar. The first identified in cd} eolatiog tu the dithienty for SPMIts in comacting
POL, ofver thin through 3 help desk, svhich inevitably was designed te address technical help, rather than
provide a forunn to aiise broader issues. which highlighted te need for a user type fortas ax flee “voice af
the customer”
Also, in relation to (¢} {relating to the lack of an allective “outeeach” investigations fimetion within ROL,
resulting ia POL, failing to identify the cont cause of problents and roissing oppartuntities for process
improvements), they consxtered practive was consterined hy vibe: of dhe contract herween POL ant the
APMBs,
Alaa Bates made a few cunmments. However. he said that the repers svas qinte now arad that JPSA seeded
Hee to reflect, He was aby aware that POL. were prosers anil was therefore restrintad in olen fre conlal
say. Hoseover, he said shas the dtr neport fand veveasgetion] helped it opening a didogue henvess:
POL and JPSA, Indeod, they had just come from a mesting with POL, and were iouking at the way in
which they can investigate vases to age what can be done in the wore open covirorenent. They ane
prepared to consider whether there are w ig which things could have been done better. However. in
terms of comments on de report in deta aif, it is still early iy di JAMF said that although it is an imeom.
report it is quite detaifes,
JAMP thea sepened the atecting up lor coniments frorn those attending, and in particular che other MPs.
I MP Oo MOMP?) said that they bad finally got POI. to accept that eey did rt have a
system n that never roakes mistakes or causes problems. He avked whether, in relation tw the Spot Reviews:
and to the concern which Second Sight made reference to, whether each Spot Review ahows sume cause
for concen,
Apoond Sigtt sat that at least tovo of the Spot Reviows were very mach work is progress, However, in
relation te SRE ant SR22, they had bees able to reach preliminary coacbisions.
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Ja relation to SKI, there was a lack of timely, avcurate and complete iformation and that Unis is their
opision was 8 significant Jactor. This was based on a svider definition of Horizon, net just dee sadtwware.
so it Inchiled the processes and the infannation made available to the SPMEs.
IAOMP said again that Second Sight has spor checked for mei in each one had found a problem, 50
cenchaked OL had some responsibility
Y heed reached a tentative conclusiun on the
however, the individual SPMR may nut have
before. However, these are sill preliminary
Second Sight reiterated that in relation to SRL and SR27 th
ixsues, In relation to SR22 POU. had already onde change:
oxpeneaced problems had the process change taken place
sonchisions,
to selation i SRS, which relates to the isso of remote necese. they had recent gew information which
was potentially sigmiicant. MMP asked whore this information had come from ancl Seoond Sight said it
‘had come from the relevant SEMR, who identified an coral proving that a meeting had tuber pave.
However, this was very noch late breaking infoonation and in order i de this justice, they need to
elton this out,
Sound Sight also referred to SRI} whiok tiey cid was still int the air relating te snysterious transactions.
Horwevet, the Spat Review that the MPs are probably most interested in, i« 8)
and the air gay heeween Camelot and Horizon.
relating fo serateh cards
in this particular case there was a huge disparity in celation to the open all day shop and the Poa Office
soumter, The stor hones were out of syse compared to the branch. The problens has been fixed in tover
stages, a procederal change, lat tre real thy came in February 2012 with an astomancn joining the
wees syetoms together
MMP conmented that alter all the work done by Second Sight, th
Sevenid Sight said they were reporting on four, but that work had In
said that bie comment was not inended to be @ oriticisns,
have spot checked four problems.
done on mure than four, MMP
Thowas asked whether we can new kaow if these issues are being resolved and in this new spirit of
teansparetioy.
MYMP said that if it is for POL to address, he wondd be far less tiappy about that
Second Sight said that the POL issue of defects or bags did not relate to the Sour spot reviews.
Andrew Bridgen MP (ABMP) asked Second Sight if they heltweved the issues that they had Mentified had
an inipant in relation to the historic convictions.
Second Sight said that was a fegal quesuon vhich they were not guadified to answer and they ded sot
consider it was appropriate ts express an opinion. They have to prevent facts and itis for offers te
scmsider the inspact om any histone vases,
However, ane of the Second Sight individuals said that he considered that SR22 makes a reference to
spathing that is germane to this.
JAMP(T) said that this was a very good question 10 pul to the Minster ar POL or both
SAME said that it strikes bim that because POL has produced sca changes mt proossses ac a rod of
investigation, and three more have been announced today, if these had been it place bedure those
prosecutions took place, it is unlikely that all of those prosecusions would have taken place.
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OHiver Lotwin MP satd that thes was an issue as to the status of the week. Second Sight had been asked wo
present an interins report today, ‘The other Spot Reviews are work in progress, However, FOL was
lowe being taker and the cost. Secund Sight are act sure what POH. val
mach to te dene. They do net know bow this wilt fit in to fer
regime that POL announced today. Alf Spot Reviews have elements which are complicated. They hoped
that shee Spat Review process would streamline the processes. However, the difftculty ix petting
information from departnenis within POH. or from ooutractors, There are, or can be, conmpten tenes
involved, and where they are dealing with conflicts of evidence, for example in 8 Tt SHL2, POL. have:
Where there is a conflict of evidence, they need te step back and look for other evidenve (c2
the entail in relation to refevant people fram 288%) However, fest week, the name of the relevant POL
person was identifies. Betnse that, POL had said they bad nie recurd of any aieetiag. This is a poterntally
signifioant discovery far SR2. That is frist os exareple of the possible complenities whict may arise.
Second Sight alse sid that the SRs are a good deaf more current than the MP's cases. Thowe selate tx
multiple issues and ge back a long way in terms of date. However, there is one hig issue which they
weatld Hike te peagress which 18 one 3s te user identity and Hoozen logs and the NML data. There are «
ramober of SPAMS whe it is claimed were making fansachons baked to their aser 1D and Secand Sight
vent to explore whether there is any alternative explanation other than tie the user (D definitely relates
gs that user.
Researcher fox ]/MP} referred to a case which js ost of timae for submitimy for eeview and asked whether
1» contd be subrntied now. LAMP said that i achiove this mecting there was an agreement sath POL and
Seoond Sight that there needed to be sume cot off point, POL wishes to have a special ber different
procedure for ather cases, possibly with the company secretary, su thas cases go to a different conte other
than 3 beip desk. There was thon reference to the POL response, identifying three sclubans, inchuding the
creation of a working party & relation io te Second Sitt review with the ineplication thai they want to.
get theoagh these canes. MIMP asked whether the working party woud hechude Second Sigh and JAMP .
said that he did nor know. MMP expressed concerns about thix group, if Sesonst Sight were not allowed
to pursue theie investigation and the tearn was dissipated, so that work would he done by 3 collaborative
working party with peop: donded on by POL. then he thought ony progress made to date would be lost.
Although 2 might take much longer, he vonsidered that Secor
Stabt shoud go through the issuice and
sraeking peony.
should not lot go and certaindy pot for some
ey fairy
JAMP said thas there way well be ae carly parliamentary oppornanity to make that point.
49) fworsant MP] refered to the POL yess statement and askint if it was oomsidered that the siptemient wats
accaeate and whether twas equally ane uf two years aga.
Second Sight reforrud te page 8 of deie neport and to comcheiog é5}, hat altheagh they hed foustd se
evidence of system-wide problems with the Harizon software, they have found concerns with the Horizon
aysican using the wider definition, whick inchides the associated processes. So in reintion te the PLA,
stitement, there are spaces With regard te the Heriot sapparting processes
‘There was tirther reference te the POL statement and the caret ie relation to she SPMRs Cf any
SPMR..."). A slightly more fideone apology might have bees more appropaate, bearing an roxad etrat
the SPMR« have sulfived. Thie falls abort of what might have been expected, partioulady for SPMEs
swhose fives have been decinuated anst if wonld have preferred to see a minge fedsemne apology. Second
Sigis reported frequent criticisms relating te teainiag and support which they de aot consider were
adequately covered axl wonld fike caver in the remaining 22 work in prognnas Spot Reviews.
TAMP wilt be issuing 9 statexsons aml veutd work on xolptions, There was reference to hoth civil and
criminal claims There are ewe issues there One that needs to sort aut the lives of those whose lives have
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been decimated and also to look at the issue of independence and how this has been dealt with in the past
and how it might be dealt with in the future.
Particular reference was mate to Alan Bates who was referred to as “legendary”, “valuable” and
emphasis on his work being anpaid. The hope was expressed that he wonld play a part moving forwards.
MMP asked whether POL would attend any fhether meeting t speak and to be available 1o answer
questivns.
JAMP said that they would be returning in the Autuoi and wessld reconvene then and that at that meeting
they would ask PLL t aitend fo speak.
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Metadata
Interim Report into alleged problems with the Horizon system
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1.
Introduction and Scope
ii.
1.2.
1.3,
14,
Following discussions with Post Office Limited (‘POL’) Senior Management in June and July 2012,
with the Rt Hon James Arbuthnot MP and with Alan Bates and Kay Linnell representing the Justice
for Subpostmasters Alliance (‘the JFSA’}, Second Sight Support Services Ltd (‘Second Sight’) was
appointed to carry out a review into alleged problems with POL's 'Horizon' System.
The remit of the Investigation/inquiry was later defined as:
“to consider and to advise on whether there are any systemic issues ond/or concerns with the
"Horizon" system, including training and support processes, giving evidence and reasons for
the conclusions reached".
It was also agreed that Second Sight's report would:
“report on the remit and if necessary will contain recommendations and/or alternative
recommendations to Post Office Limited relating to the issues and concerns investigated
during the inquiry. The report and recommendations are to be the expert and reasoned
opinion of Second Sight in the light of the evidence seen during the inquiry.”
It became necessary to ensure that references to “the Horizon System" were understood and agreed
by all stakeholders. Was Second Sight to look only for defects in the software code of Horizon? Or,
was it to take a broader view and also examine:
8) the surrounding Operatianal Processes, both at branch level and in POL's central processing
centres;
b)
the interfaces between the Horizon system and other systems that are the responsibility of
organisations other than POL such as Camelot, the Bank of Ireland, the Co-Op, various
Energy Companies and the ‘LINK' system for processing Credit and Debit Card payments and
withdrawals;
c} the power supply and telecommunications equipment that connects every Horizon terminal
to POL's centralised data centres;
d
the training available to Sub-Postmasters (‘SPMRs’) and their staff and whether it was
commensurate with the demands of the day-to-day job at the counter;
the actions need to ‘balance’ at the end of each Trading Period (‘TP’) and the investigation
work needed in dealing with errors and Transaction Corrections (‘TCs');
f} the level of support available to SPMRs and their staff from POL’s Helpdesk;
g) the effectiveness of POL's audit and investigative processes, both in assisting SPMRs who
calted for help in determining the underlying root cause of shortfalls and in providing
evidence for other action by POL such as in Civil and Criminal Proceedings.
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1.5. in answering the question as to whether Second Sight was to only examine the narrowly-defined
Horizon software, or the far more broadly-defined Horizon system, POL's own definition of ‘Horizon’
provided much of the answer.
1.6. in May 2011, POt's Information Manager defined "Horizon" as follows:
“t can advise that the name Horizon relates to the entire application. This encompasses the
software, both bespoke and softwore packages, the computer hardwore and
communications equipment installed in branch and the central dota centres. It includes the
software used to control and monitor the systems. in addition, I can advise you that testing oo
and training systems are also referred to as Horizon".
1.7. This POL definition does not include ‘audit and investigative processes’, but it quickly became clear
that POL's audit and investigation methods have had a profound impact on the SPMRs involved in +
almost all of the cases we have examined.
1.8. Second Sight's investigation has consequently addressed matters well beyond the narrow definition
of the core software component of Horizon in order to ensure that we have adequately dealt with
the totality of the concerns raised by SPMRs.
1.9. Before describing the approach adopted in this Investigation, it is necessary to put the scale of the
Investigation in context.
1,10. Second Sight has been asked to investigate 47 cases submitted to either the JFSA or to the office of
the Rt Hon Janes Arbuthnot MP. All of these submissions are highly critical of POL's Horizon system
and in many cases, the way that POL has dealt with the matters reported. a)
1.11. The Horizon system involves approximately 68,000 users and processes over 6 million transactions
every day. The entire population of over 11,800 branches was notified about the proposed
investigation by Second Sight and this resulted in 14 additional cases being accepted for
investigation. Whilst in no way minimizing the potential importance of the cases under review, this
level of response suggests that the vast majority of SPMRs and branches are at least reasonably
happy with the Horizon system.
2. Approach adopted
2.1. Second Sight has examined cases submitted from two sources. The first selection of cases were
those submitted by SPMRs, with the endorsement of their constituency MP, through the office of
the Rt Hon James Arbuthnot MP. There were 29 such cases.
2.2. The second source of cases was through the JFSA. These cases were submitted in accordance with
an Agreement dated December 2012 between POL, Second Sight and the JFSA (see Appendix 5).
That Agreement set a cut-off date of 28th February 2013 for the submission of suitable cases to the
AFSA, or directly to Second Sight.
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2.3, in the event, over 60 SPMRs contacted the JFSA and 18 cases were considered to be suitable for
submission to Second Sight. These 18 JFSA-sourced cases were generally simpler, more recent and
better documented than the cases submitted via MPs.
2.4, in dealing with each case, Second Sight first requested copies of all the documents in POL's Case File.
The initial plan was to interview each SPMR after all the POL-sourced documentation had been
examined. This has proved to be much more difficult than was expected. Delays in producing case
documentation to Second Sight have added materially to the cost of the investigation and to the
time taken to complete it. The main problem here seems to be that POL does not maintain one
central file for each case. Rather, documents had to be gathered from multiple internal sources.
2.5. Where MP sponsored cases have been subject to either Civil Recovery or Criminal Prosecution, POL's
centralised Legal Department was able to supply many documents. However, we found that a
significant number of cases had not progressed this far and that documentation was held in many
locations within POL, including the National Business Support Centre (‘the NBSC’), the Helpdesk, the
Branch Support Team, the Security Team, the Former Agent Accounting Department, and Legal
Services.
2.6, In several instances, POL's seven-year Document Retention Policy has meant that little or no
documentation was available for Second Sight to examine. The same retention policy applies to the
underlying Horizon computer data. In a number of cases we were provided with POL created
documents by SPMRs, where POL had been unable to supply the same document, even though it
was within the 7 year retention period.
2.7, After examining all of the available documents and in some cases the Horizon computer data relating
to each case, Second Sight has been making contact with each SPMR in order to obtain, through
telephone calls and face-to-face interviews, the SPMR’s version of events. Second Sight then
summarised the SPMR's assertions into one or more ‘Spot Reviews’. To date, 29 Spot Reviews have
been created by Second Sight and other Spot Reviews are planned. Ten Spot Reviews have been
sent to POL and a formal response received. Nineteen Spot Reviews are currently ‘work in progress’.
3. The concept of a ‘Spot Review’
3.1. It became clear at an early stage in the investigation that it would not be efficient or cost effective
for Second Sight to examine all of the issues raised by SPMRs or covered in POL’s Case Files. Hl
3.2. Accordingly, and with the consent and approval of both the JFSA and individual SPMRs, Second Sight
conducted a ‘fast track’ review of the available information in each case and identified the key issues
that were relevant to the remit of the Investigation. Each key issue was then dealt with as a Spot
Review. A case with multiple issues would give rise to multiple Spot Reviews, each of which would
be dealt with on an individual basis.
3.3, It was agreed by POL, Second Sight, the JFSA and the Rt Hon James Arbuthnot MP that any report
issued by Second Sight would maintain anonymity with regard to the identity of individual SPMR I
cases. Accordingly, this Report does not reveal the identity of any of the cases being considered. In
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all instances where POL was asked to respond to specific issues, the SPMR's identity was revealed to
POL, but only after the SPMR's permission had been obtained.
3.4, This approach to Spot Reviews was intended to be a self-contained, easy to understand procedure,
free from unexplained acronyms and backed up by SPMR supplied evidential material. Each Spot
Review was then submitted to POL for a formal response. The POL response was then discussed
with both the SPMR and the JFSA and an attempt made to reach agreement and closure between
POL and the SPMR, as to the issues dealt with in each Spot Review.
3.5,
Regrettably, no such agreement and closure has been achieved to date. In the face of assertions, by
both the SPMR and by POL, supported in many cases by only partial or conflicting evidence, Second
Sight has attempted to find out what really happened. In mast of the Spot Reviews investigated, we
have been able to find additional information that has been of assistance in understanding what
actually happened.
3.6. This Interim Report covers 4 Spot Reviews where we have been able to reach a preliminary
conclusion or at least make substantial progress on the matters being reviewed.
3.7. As Spot Reviews were prepared, discussed and responded to by POL, Second Sight was able to see a
number of ‘thematic issues’ that were of concern to many of the SPMRs we have had contact with.
These frequently reported issues, some of which are described in Section 7 of this Interim Report,
will be addressed in more detail in the Final Report.
4. Involvement of the JFSA:
4.1. At the request of the MPs representing their SPMR constituents and with agreement from POL,
Second Sight has worked closely with Mr Alan Bates of the JFSA and with the JFSA's appointed
Forensic Accountant Kay Linnell. This developed into a sound working relationship and Second Sight
wishes to put on record its thanks to both Mr Bates and Ms Linnell for their help and professional
conduct throughout the investigation.
5. Spot Reviews and Responses from POL:
5.1. This interim Report deals with just 4 of the 29 Spot Reviews so far prepared by Second Sight. These 4
Spot Reviews deai with events that are typical of the matters reported to Second Sight by many of
the SPMRs we have had contact with. They also relate to matters that appeared, both at the time
they were issued to POL and when the selection was made for inclusion in this interim Report, to be
particularly relevant to the remit of the investigation.
5.2. Second Sight has asked POL to deliver Spot Review responses that would prove as easy to
understand as the Spot Reviews themselves; that addressed the spirit, as well as the letter, of the ~™
SPMRs' complaints; and that were backed up by evidence.
5.3, Whilst the Spot Review responses received from POL can be seen to be thorough, they are long and
highly technical documents. in some cases, they present counter-assertions, based on Standard
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Operating Procedures and Controls, rather than tangible evidence of what actually happened.
Accordingly, it has been necessary to summarise and simplify the responses received.
5.4. Our experience over many years, shows that even apparently robust controls sometimes fail to
work, or can be circumvented by a determined and skilful person. Second Sight is therefore seeking
further evidence in support of POL's responses to some of the issues covered by the Spot Reviews
dealt with in this interim Report.
5.5. Itis of course hard for POL to prove the negative (i.e. that controls have not been circumvented) but
it is only fair to say that POL now finds itself in the same situation that has faced all of the SPMRs
who have submitted cases. They too, were unable to prove that the shortages or transactions that
they reported to POL, and in respect of which they sought POt's help, were not the result of their
own (or their employees’) errors or criminal activity. In every case we have fooked at, only fimited
assistance has been provided to SPMRs by POL.
5.6. In the 4 Spot Reviews covered by this report, POL has only acknowledged minor failings in the
implementation of its procedures and processes, or in other relevant areas. It has agreed in
principle to a number of process improvements relating to the matters under investigation by
Second Sight, and some of these have been implemented already.
5.7. Many of the SPMRs we have dealt with remain aggrieved and dissatisfied with what they see as
POL's defensive and unsympathetic response. Whereas we had expected that some form of closure
would be reached between POL and the SPMR associated with each Spot Review, this has so far not
been achieved.
6. Did defects in Horizon cause some of the losses for which SPMRs or their staff
were blamed?
6.1. There is still much work to be done on the cases Second Sight has been asked to investigate. We
have concluded in one of the four Spot Reviews covered by this Interim Report (Spot Review SRO1)
that, although the Horizon system operated as designed, the lack of timely, accurate and complete
information presented to the SPMR was a significant factor in his failing to follow the correct
procedure.
6.2. In that incident, shortcomings in the branch's primary and fall-back telecommunications equipment
exposed a weakness that led to a poor counter-level experience both for the SPMR and his
customer,
6.3. We also note, in Spot Review $R22, that POL made a change to its standard operating procedures for
Scratch Cards, just a few days after the SPMR was suspended. It is possible, that if this change had
been implemented earlier, many of the problems would not have occurred.
6.4. In the course of our extensive discussions with POL over the last 12 months, POL has disclosed to
Second Sight that, in 2011 and 2012, it had discovered “defects” in Horizon online that had impacted
76 branches.
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6.5. The first defect, referred to as the “Receipts and Payments Mismotch Problem", impacted 62
branches. St was discovered in September 2010 as a result of Fujitsu's monitoring of system events
{although there were subsequent calls from branches). The aggregate of the discrepancies arising
from this system defect was £9,029, the largest shortfall being £777 and the largest surplus £7,044.
POL has informed us that all shortages were addressed at no loss to any SPMR.
6.6. The second defect, referred to as the “Local Suspense Account Problem", affected 14 branches, and
generated discrepancies totalling £4,486, including a temporary shortfall of £9,800 at one branch
and a surplus of £3,200 at another (the remaining 12 branches were all impacted by amounts of less
than £161).
6.7. POL was unaware of this second defect until, a year after its first occurrence in 2011, it re-occurred
and an unexplained shortfall was reported by an SPMR.
6.8. POt's initiat investigations in 2012 failed to reveal the system defect and, because the cause could
not be identified, the amount was written off. Fujitsu looked into the matter early in 2013 and
discovered, and then corrected, the defect.
6.9. It seems however, that the shortfalls (and surpluses) that occurred at the first occurrence (in 2011)
resulted in branches being asked to make good incorrect amounts.
6.10. POL has informed us that it has disclosed, in Witness Statements to English Courts, information
about one other subsequently-corrected defect or “bug” in the Horizon software.
7. Frequently reported issues
7.1. It has become ciear that whereas the Horizon system appears to achieve its intended purpose
almost all of the time and operates smoothly for most SPMRs and their staff, some combinations of
‘events can trigger situations where probiems occur.
7.2. The following issues have been reported to us by multiple SPMRs as being of particular concern
about the Horizon system:
a) A multi-product system that is far more complex and demanding than, for example, that ~
found in a typical high street bank;
b) Multiple transactional interfaces ("hand-offs'} to systems outside of Horizon such as Lottery
Scratch Card and Bank of Ireland ATMs that cause repeated and possibly farge shortfalls non
that take undue amounts of time to investigate and resolve;
¢) Unreliable hardware leading to printer failures, screen misalignment (pressing one icon
sometimes results in the system selecting an incorrect icon) and failed communications voy
links;
d} The complexity of end of Trading Period (‘TP'} processes and the lack of a ‘suspense account’
option which would allow disputed transactions to be dealt with in a neutral manner; 7
€) Inexperienced trainers and gaps in training coverage;
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f) The lack of some form of on-site Supervision and Quality Control similar to that made
available to staff employed in POL’s Crown Offices;
e) The receipt of centrally input, overnight ‘corrections' and other changes allegedly not input
by SPMRs or their staff;
h) inadequate Helpdesk support, with responses that are ‘script-based’ and sometimes cause
further or greater problems;
i} POL investigation and audit teams that have an asset-recovery or prosecution bias and fail to
seek the root cause of reported problems;
j) A contract between SPMRs and POL that transfers almost all of the commercial risk to the
SPMRs, but with decreasing support being provided. In its risk reward decision making, POL
benefits from any savings, while SPMRs may suffer increased risk.
7.3, We have read ail of the examples of problems reported to us by the SPMRs we have contacted. We
can't help concluding that had POL investigated more of the “mysterious shortages" and problems
reported to it, with the thoroughness that it has investigated those reported to it by Second Sight,
POL would have been in a much better position to resolve the matters raised, and would also have
benefited from process improvements.
7.4. it may be that a significant limitation in the way that POL responds to matters reported to it are the
terms of reference for the POL Investigations Division. The standard contract between POL and
SPMRs states:
“The Investigation Division does NOT enquire into matters where crime fs not suspected.”
7.5. This appears to suggest that POL does not provide any investigation support to SPMRs, except where
criminality is suspected. The cases we have examined show that POL does sometimes provide
limited investigative support to SPMRs reporting problems, but clearly, POL’s ability to do this is
constrained,
7.6. it is also unfortunate, in our view, that when POL does investigate cases, there is often a focus on
‘asset recovery solutions’ without first establishing the underlying root cause of the problem. This is
also an example of a missed opportunity to be in a much better position to resolve problems and to
benefit from process improvements.
7.7. Another issue raised, by some of the SPMRs that we have had contact with, is the allegation that the
only time they were provided a copy of the full contract between POL and SPMRs, was when POL
commenced litigation or recovery actions. This is contrary to POt’s policy and procedures and
enquiries are underway to find out what has happened in the cases where this allegation has been
made.
7.8. The 4 Spot Reviews where we have been able to reach preliminary conclusions, or at least make
substantial progress in investigating the matters raised, are attached at Appendices
1to 4,
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8. Preliminary Conclusions
8.1. This is an Interim Report and there is much work still to be done. Any conclusions reached at this
point will need to be updated in the light of new information that arises as the investigation
continues.
8.2. Our preliminary conclusions are:
a) We have so far found no evidence of system wide (systemic) problems with the Horizon
software;
b)
We are aware of 2 incidents where defects or ‘bugs’ in the Horizon software gave rise to 76
branches being affected by incorrect balances or transactions, which took some time to
identify and correct;
¢)} Occasionally an unusual combination of events, such as a power or communications failure
during the processing of a transaction, can give rise a situation where timely, accurate and
complete information about the status of a transaction is not immediately available to a
SPMR;
dj
When individual SPMRs experience or report problems, POL’s response can appear to be
unhelpful, unsympathetic or simply fail to solve the underlying problem. The lack of a ‘user
forum’ or similar facility, means that SPMRs have little opportunity to raise issues of concern
at an appropriate level within POL;
e
The lack of an effective ‘outreach’ investigations function within POL, results in POL failing to
identify the root cause of problems and missing opportunities for process improvements;
f) The end of Trading Period processes can be problematic for individual SPMRs, particularly if
they are dealing with unresolved Transaction Corrections (‘TCs’). The lack of a ‘suspense
account’ option means that it is difficult for disputed TCs to be dealt with in a neutral
manner.
Jan R Henderson CCE, CISA, FCA 8 July 2013
Ron Warmington CFE, FCA
Second Sight Support Services Ltd
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Spot Review SRO1 Appendix 1
1,1, The SPMR reports that there were intermittent internet connectivity problems on 4"" October 2012.
Online payments and withdrawal transactions were sometimes successful, but also failed on
occasions. it is likely that Horizon was partially operating through its back-up (mobile phone)
connection. Some card payments had to be attempted two or three times before being accepted.
At approximately 10:32 hrs, a customer tried to pay his £76.09 telephone bilt with his bank debit
card, but was not successful. The customer then withdrew £80.00 cash and used this to pay the
telephone bill.
1.2, The SPMR stamped the customer's telephone bill as evidence of receipt of payment, returning
change of £3.91. Several weeks later, the customer returned from holiday to find his telephone had
been cut off due to non-payment of the bill. The SPMR’s examination of the Transaction Log
showed that ail components of the transaction had been reversed by POL. The SPMR states that he
did not initiate those reversals, nor did he receive any reversal notifications.
1.3. The SPMR raised this as an issue with POL but was told that due to cost issues the Horizon
transaction data, necessary to fully investigate the matter, could not be requested. The SPMR felt
that it was implied that he had stolen the money when he was told to make good the shortage. This
meant that 2 people had paid the telephone bill: the customer who handed cash to the SPMR, and
also the SPMR on instructions from POL to make good the shortage, after POL centrally had paid the
bill.
1.4, The SPMR was subsequently informed that he should have had a surplus of £76.09 due to the
reversal of the transactions.
1.5. POL's 10-page response to Second Sight asserts that the Spot Review does not demonstrate any
failing in Horizon and that the root cause of the difficulties suffered by the SPMR was his failure to
follow the on-screen and printed instructions given by Horizon. POL states that the SPMR should
have realised that some transactions had been automatically reversed because:
a) when the transactions in question first failed to be processed (because Horizon could not get
a response from the Data Centre), Horizon asked the SPMR whether he wished to cancel or
retry the transactions in response to which the SPMR opted to retry the transactions;
b) when the transactions failed again, the SPMR opted to cancel the transactions;
¢) Horizon then automatically disconnected and printed a “disconnect" receipt that showed the
transactions that had been automatically reversed;
d) astandard customer receipt was not produced and this should have toid the SPMR that the
full transaction had not proceeded;
following the disconnect, the SPMR was required to log back on and, as part of the standard
recovery process, Horizon printed a "recovery" receipt which again showed the transactions
that had been reversed and those that had been recovered.
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1.6. POL's response states that there were 4 attempts {at roughly 45 second intervals) to send the
completed basket of transactions to the Horizon Data Centre. All attempts used a mobile phone
(back-up) connection. The SPMR’s records all show these connection attempts to have failed.
However, from the Data Centre's perspective, one of the attempts did result in all of the data in the
Horizon transaction ‘basket’ being successfully transmitted to the Data Centre but, due to the
connectivity issues, the branch did not receive a confirmation of this at the time from the Data
Centre.
1.7. The cash withdrawal transaction for £80 could not be cancelled as this had already been processed
by the Bank.
1.8. The net effect of all of this was that, whilst the customer's telephone bill was not paid, the £80 debit
to his bank account was correctly processed, even though this was not reported to the SPMR at the
time this transaction was entered on the Horizon terminal. The success of this part of the
transaction was only notified to the SPMR after the customer had left the Branch. it took
approximately 5 minutes for the retry, recovery and reconnection processes to finish.
1.9. Procedurally, the SPMR was at fault here because he was not meant to allow the customer to leave
the counter until Horizon had finished its Recovery Processing.
1.10. The SPMR had stamped the customer's telephone biil as proof that it had been paid, at 10:32 hrs,
but he should nat have been given it to the customer until the Horizon system had printed out all of
the Session Receipts. This did not occur unti! 10:36 hrs, which was after the customer had left with
his stamped telephone bill. It was therefore impossible for the SPMR to return the customer's
£76,09 or to retrieve the receipt-stamped telephone bill.
1.11. Second Sight is more sympathetic to the SPMR’s position than POL appears to have been. POL’s ‘
view is that the Horizon system operated as designed. In our view, timely, accurate and complete
information was not presented to the SPMR at the time the transaction occurred. The delay in
providing this information was a significant factor in the SPMR failing to follow the correct
procedure.
1.12. At the time this problem occurred, there were multiple telecommunications failures in the branch's
main data fink and Horizon was using a mobile phone link to communicate transaction data over a
poor quality signal.
1.13. When operating, in that degraded mode, with a complex multi-part transaction {involving
communications to the banking system as well as to Horizon}, the Horizon system did operate in
accordance with its design.
1.14, But, not being able to reverse the customer's banking transaction (the £80.00 debit card
withdrawal}, Horizon relied on the SPMR being able to give the customer all of his money back and
either turning him away with his telephone bill unpaid or starting the whole process again.
1.15. Even if the customer had still been present when the recovery processes were completed (five
minutes after being handed his stamped telephone bill) and even if the SPMR had been able to
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immediately work out what had happened and what remedial actions were necessary, this would
not amount to an acceptable SPMR/Customer experience. it also raises questions about the
suitability of the mobile phone backup connection and whether a more resilient service should be
provided.
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Spot Review SROS Appendix 2
1.1, This SPMR states that on Tuesday 19th August, 2008 he observed an individual in the basement (or
a boiler room type area with lots of pipe work) of the Fujitsu office in Bracknell who demonstrated
an ability to pass transactions directly into the Horizon system and in so doing to alter, in real time
or overnight, the recorded holdings of Foreign Currency in POL Branch Offices. The SPMR also
stated that this person, after altering a branch’s cash balance, then “mode light of it” saying “I'd
better reverse that entry now or he'll have a shortage tonight.”
1.2. The SPMR further states that the person did this by generating an outgoing remittance for a branch +
{known as a ‘Rem Out’). The SPMR explained that what he observed was contrary to POL’s repeated
reassurances that any form of ‘remote access’ to Horizon transactions at branch level was possible.
1.3. OF potential significance is the alleged comment that “he’il have o shortage tonight.” This could oo
mean that the alleged transactions were not directly input to Horizon but to some ather system that
was linked to Horizon by way of overnight batch processing, or in some other way.
1.4. To put this allegation in context, over two years later, in a 7th December 2010 letter to Alan Bates my
(Chairman of the JFSA), signed by Mr. Edward Davey, MP (the then Minister for Employment
Relations, Consumer and Postal Affairs), Mr, Davey gave the following assurance:
"I recognise that the core of the JFSA's cancerns relates to the Horizon system to which you Y
attribute the financial discrepancies and shortages which have led to a number of
subpostmasters having their contracts terminated and subsequent court action. However
POL continues to express full confidence in the integrity and robustness of the Horizon system
and also categorically states that there is no remote access to the system or to ony individual
bronch terminals which would allow the accounting records to be manipulated in any way."
POL's response states that:
a} in August 2008, the basement of Fujitsu's building did contain a Horizon test environment
with access to four test versions of Horizon;
b) itis this test environment that is believed to have been witnessed by the SPMR; v
c) This test environment was not physically connected to the live Horizon system so it was not
physically possible for the alleged transactions to have occurred. It is possible that
someone showed the SPMR some form of adjustment to the test environment that was ,
misunderstood.
1.5. Simply stated, POL has rejected this allegation, stating that none of its staff who were present at the
alleged 19" August 2008 meeting, had any access to live data. ry
1.6. POL has suggested that its employee may indeed have used the phrase "this is the five system"
because, in addition to the test version of the then un-released new version of Horizon (‘HNG-X’)
being accessible from there, so was a test version of the then-current and Jive (oid) Horizon system,
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1.7. it is unfortunate that, due to the length of time that has elapsed since the alleged visit, neither POL
nor Fujitsu were able to identify any individual who met with the SPMR on the date of his alleged
visit to Bracknell,
1.8. However, on 1 July 2013, the SPMR managed to find an email proving that the meeting took place
and identifying one of the POL employees involved. Further urgent enquiries about this matter are
continuing.
1.9. In view of this conflict of evidence, Second Sight requested and was provided with the email records
of 7 POL employees believed to have been working in the Fujitsu office at Bracknell at the relevant
time.
1.10. Unfortunately, due to a change in email systems, emails from 2008 have not yet been provided to
us, but we have reviewed the relevant email records for 2011. This review has shown:
a) Anumber of different teams of POL employees were working in the Fujitsu office in Bracknell
in 2011 and possibly earlier. These teams were located on the Ground Floor and the 2™ and
4" Floors of the Fujitsu office.
b) An email sent to a number of POL employees in April 2011, including a member of the
Testing team in Bracknell, included the following comment:
“Although it is rarely done it is possible to journal from branch cash accounts.
There are possible P&BA concerns about how this would be perceived and how
disputes would be resolved,”
1.11. “P&BA" refers to ‘Product and Branch Accounting’, which is a team within POL that is responsible for
the back-office accounting system.
1.12. POL has told Second Sight that the comment noted above describes a method of altering cash
balances in the back-office accounting system, not Horizon. We note however that any changes to
Branch Cash Account balances in this way would be subsequently processed in Horizon using the
Transaction Correction (‘TC’) process. This would be notified to SPMRs and requires their consent in
order for the TC to be processed. The TC process typically runs on an overnight basis and is
necessary to ensure that the back-office accounting system remains synchronised with the Horizon
system.
1.13. Second Sight notes that this method of ultimately adjusting branch cash accounts in Horizon is
similar, but not identical to, what was described by the SPMR, albeit in an indirect rather than a
direct way. We have subsequently been told that none of the POL employees working in Bracknell
in 2008 had access to the back-office accounting system.
1.14. We are left with a conflict of evidence on this issue and our enquiries are continuing, particularly in
the light of the new information confirming that the meeting on 19™ August 2008 did in fact occur.
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Spot Review SR21 Appendix 3
1.1, This SPMR reports a situation where, on 4" Nov 2009, the Horizon system appears to have
generated a series of transactions, reversing four Positive Stock Adjustments ('SAPs') that she had
entered at 09:04 hrs that morning. The SAPs related to 15,576 stamps left over from the previous
Christmas.
1.2. The aggregate value of the four SAPs input by the SPMR was £5,577.93. Subsequently, 9 separate
Negative Stock Adjustments (transaction reference: 'SAN') appear to have been generated
automatically by Horizon, Those nine entries total £6,892.23 which equate to 16,834 stamps. All
nine entries were timed at 12:22 hrs and show the SPMR's Identification Code {i.e. as though she
had entered them).
1.3. The SPMR, however, denies executing any of these SAN adjustments. She states that she was
unaware of their existence until long after the Audit of her Branch. She has no idea whether they
had any impact on the shortfall attributed to her.
1.4, We have found no evidence that POL investigated this combined set of transactions or, if they were
investigated, that the findings were ever discussed with the SPMR.
1.5. A POL Auditor on 6th January 2010, after becoming aware of the large quantity of excess stamps
held by this Branch, asked the SPMR: “
"Why didn't you declare your stamps?"
1.6. The SPMR states that she told the POL Auditor that she did declare the stamps using the SAP wy
procedure. It is not clear whether the eventual £9,616.66 shortfall, for which POL held the SPMR
accountable, included the impact of those stamps.
1.7. The SPMR is adamant that she raised this issue with the POL Auditor but states that she was never
provided with any answers. Neither the problem with the stamps, nor the SPMR's assertions about
intermittent problems with the PiN Pad, raised both at the time of the Audit and in subsequent
interviews, seem to have been adequately addressed by POL's investigators.
1.8. POL's 3-page response to this Spot Review states that:
a) Horizon does not generate automatic stock adjustments. The function simply does not exist
within Horizon; -
b) The stock adjustments questioned in this Spot Review were all recorded against the SPMR's
user 1D which demonstrates that those transactions were manually conducted in the
branch;
c) Even if there were erroneous stock adjustments, these adjustments could not cause the
SPMR to suffer a shortfall due to the "double entry" balancing process inherent in Horizon.
1.9. POL's response does suggest a possible explanation as to what happened here, stating:
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"The appearance of positive and negative stock adjustments for stamps made by SPMRs on
the same day reflects a common non-conformance issue in the manner by which SPMRs
inputted data, tt led to significant branch conformance instructions in 2009 to encourage
branches to record their rationale for why they were using the stack adjustment function."
and continuing:
“Adjustments of the type shown at this branch are indicative of a situation where branches
prefer to sell all varieties of 1st class stamps via the same icon (i.e. whether the stamps are
standard 1st class or special issue commemorative Ist closs). Post Office requires sales vio
the correct icons to properly drive sales, remuneration and billing data. However, branches
found it easier to serve customers by adjusting stock out of "Specials" into “Standard”
categories and then making sales from those Standard icons. tt is however impossible for
Post Office and Fujitsu to say for certain why the SPMR made stock adjustments in this
particular branch."
1.10. Once again, we are dealing with a conflict of evidence where the SPMR states that she did not enter
the stock adjustments and POL states that the Horizon system could not have entered them either.
POL has, at Second Sight's request, produced the underlying Horizon detailed transaction data and it
will be examined to try to establish what really did happen.
1.11, In any event, POL did not arrive at agreement with the SPMR as to what had happened. This failure
to arrive at closure has left this SPMR with the powerful and fasting conviction that her "mysterious
£9,616.66 shortfall” was wholly or partially accounted for by those transactions that she says she did
not enter, even though the system says, on the basis of her User ID, that she did.
1.12, Further contact with this SPMR indicates that she remains confused as to what really happened so it
is possible that the £9,616.66 shortfall was the result of mistakes made by her or by her staff.
Further investigative work is therefore needed and, as yet, Second Sight cannot reach a firm
conclusion on this case.
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Spot Review SR22 Appendix 4
1.1. This SPMR reports a situation where the Camelot and Horizon records for ‘Remitted In' (or
‘Remmed-in’) Camelot Scratch Cards (‘Instants') were out of synchronisation and were incorrectly
shown in Horizon. The SPMR claims that the material differences between the two systems resulted
in substantial lasses being incurred and that POL failed to fully investigate and/or to communicate
its findings in respect of those differences.
1,2. As an example of this, the SPMR reports, that on 17th February 2010, the Horizon print-out of
‘Remmed-in' cards shows £1,280 worth of cards (8 full packs) whereas a POL-produced Excel
spreadsheet shows that, on that date, £2,080 worth of cards (13 full packs) were Remmed in. The
difference here is £800, which was a shortfall that the SPMR had to make good.
1.3. ft is clear that this SPMR experienced numerous problems with Scratch Cards and a review of TCs
issued to the branch shows that, between 3rd November 2009 and 29th September 2010 (the
period during which unexplained losses were occurring at the branch) 36 of the 47 TCs issued to this
branch related to Scratch Cards. Also, 13 of those 36 TCs were for amounts exactly divisible by £160
(i.e. the value of a full pack of Scratch Cards).
1.4, Those 13 TCs comprised 4 Debit TCs totalling £2,560 and 9 Credit TCs (which serve to reduce the
branch's stock value) totalling £7,840.
1.5. Together therefore, the 13 TCs produced a net deficiency of £5,280. In pure monetary terms this
was approximately 36% of the total shortfall of £14,842 that POL claimed, in the ensuing criminal
prosecution, had been stolen by the SPMR.
1.6. POL seems to have been aware, well before February 2010, of errors made by many SPMRs in
dealing with Scratch Cards. For example, an article in the 17-23 January 2008 Issue of ‘Branch Focus'
had warned SPMRs that:
“In the fast three months there have been over 1,100 Transaction Correction notices issued
to branches to a value of £744,000".
1.7. We have established that during the relevant period, ali packs of Scratch Cards should have been
activated on the Camelot terminal before being Remmed-in to Horizon. The SPMR asserts that she
was instructed not to do that by POL.
1.8. tt also transpires that a change to standard operating procedures for Scratch Cards took place a
week after this particular SPMR was suspended in September 2010. From this point, SPMRs were no
longer required to remit packs of Scratch Cards into Horizon.
1.9. It follows, that after September 2010 it was impossible to have packs of Scratch Cards recorded in
Horizon whilst awaiting activation. ttis also clear that a balance should be struck before the start of
trading on a Thursday morning, rather than at 17:30 hrs on a Wednesday evening, as had been the
standard practice of this SPMR.
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1,10. In its response to this Spot Review, POL says that it cannot find any evidence that there is a problem
with the Horizon system with regard to Remmed-in Scratch Cards.
1.11. POL also states that, during the period being examined in this Spot Review, if SPMRs had correctly
Remmed-in Scratch Cards to the Horizon system, the final figures recorded in the Horizon system at
the end of each day would match the final figure in the Camelot system for the activation of Scratch
Cards,
1.12. POL's investigation has established that, on 17th February 2010, there were 2 remittance sessions
relating to Scratch Cards at this branch, It follows, says POL, that two receipts would have been
automatically produced by the Horizon system, The discrepancy in the figures on that day resulted
from the SPMR presenting only one of the two receipts. The SPMR, however, disputes POL's
assertion, stating that not only did she not make that second entry in Horizon but that she can't
recollect ever Remming-in two Scratch Card entries within a 5 minute period.
1.13. POL has also told us that:
“Further to the discovery of large Scratch Card losses at Post Office branches (for example
£147,000 in aggregate losses were discovered following the audit of 20 branches in and
ground May 2009), a process change was rolled out during January and February 2012. This
process change was designed to significantly reduce loss/waste associated with Scratch
Cards".
1.14. The SPMR was charged with Theft and False Accounting but the Theft charge was dropped on the
basis that the SPMR pleaded guilty to False Accounting. The SPMR was convicted on the False
Accounting charge and an order made to repay the £14,842, plus costs of £1,000 and 120 hrs of
Community Service. The total of £15,842 was repaid before the court-assigned deadline.
1.15. The key issue here, that seems to have been the root cause of this branch's frequent
Camelot/Horizon problems, was the difference between the opening hours of the shop and its Post
Office Counter. The shop was open from 06:30 hrs until 21:30 hrs from Monday to Saturday and
from 08:00 hrs until 21:30 hrs on Sundays, whereas its Post Office counter was only open from 09:00
to 17:30 on Monday to Friday and from 09:00 to 12:30 on Saturdays.
1,16. The difference in opening times, particularly on Wednesdays when balancing {incorrectly) took
place, and at the end of each Trading Period, meant that the shop was selling Scratch Cards both
before, and then long after, its Post Office counter (and therefore the Horizon system) was able to
record them.
1.17. It was perhaps inevitable, in ‘open-ali-hours' outlets like this one, that the Horizon and Camelot
systems would be ‘out of sync’ a great deal of the time. it took some time for POL to recognise that
its standard operating procedure was presenting a real challenge to this type of retail outlet.
1.18. Second Sight notes that the February 2012 system change eliminated the possibility of
synchronisation errors between the two systems. This was after a number of interim process
improvements.
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1.19. The fact that the synchronisation process between the two systems is now far better than it was in
2010 seems to give some support to the SPMR's assertion that the then-existing process was
deficient and that her consequent errors were a material factor in the confusion that ultimately led
to her conviction for False Accounting.
1.20. Further investigative work is needed to get to the bottom of this complex matter,
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APPENDIX 5
RAISING CONCERNS WITH HORIZON
Introduction - The Purpose, of this Document
This is a paper which has been issued by the agreement of Post Office Limited and
the Justice for Subpastmasters Alliance (JFSA).
Post Office Limited is concerned to hear about and determined to thoroughly and
even-nandedly Investigate cases where there have been persistent assertions that
the Horizon system (Horizon) may be the source of unresolved shortages in Post
Offices.
Post Office Limited cares about its agents, the thousands of subpostmasters and
subpostmistresses (SPMRs) operating branches across the land for the benefit of the
community, Post Office Limited is committed ta the highest standards of corporate
governance, openness, probity and accountability. It is happy to be sensibly
challenged and believes this to be a good thing.
Post Office Limited also acknowledges that there may be a concern that some SPMRs
might not express thelr concerns because they feel that speaking up would be
detrimental to Uhelr position, that they may also fear that they will be herassed or t
victimised if they speak out, and thal in these circumstances they may prefer to i
ignore their concerns than tu report them,
Post Office Limited would like to take this opportunity to emphasise that these fears {
I, Although SPMRs are not employees of Post Office Limited, Post Office :
Limited takes seriously any such allegations.
Therefore Post Office Limited, working with JFSA, is setting out In this document a
process where you can raise concems regarding Horizon, and fee] comfortabie about
doing so. Any investigation of any concerns which you may raise will not influence ’
or be influenced by any disciplinary or network transformation actions that already
affect you.
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This process also applies to all Post Office Limited employees, contractors and ;
agency staff working with Horizon for Post Office Limited. I
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Insummary this document aims to:
- reassure you that you should have no fears about raising any concerns over
Horizon, including over victimisation and reprisats;
- provide you with a process for raising any such concerns;
- demonstrate to you that your concerns will be taken seriously and that you.
will get a response to your concerns; and
~ give you options If you are still not satisfied.
Hawever Post Office Limited. takes deliberate fraud, dishonesty and Illegal conduct
against it very seriously, and has a duty to protect Post Office money and teke action
if it has reasonable suspicions regarding the same. So you should only raise your
concerns through this process in good faith, and not frivolousiy, maliciously or for
personal gain,
How to volce your concerns
There are two steps you can take to voice your concerns, You can either contact
JIFSA in the first instance (see (A) below}, or you can ge directly lo Second Sight
Support Services Limited (Second Sight), an Independent third party which Is already
uridertaking a review of several Horizon cases in consultation with the Right
Honourable James Arbuthnot MP (see (8) below)
(A) Initial Steps you can take with JESA
1. You can discuss any concerns with JFSA and/or its advisers (contact detalis at
jfsa.org.uk). JFSA undertakes to treat these discussions as confidential, It Is
then your decision as lo whether or not you wish to pursue your concerns
through the Inquiry Route set out in Section 6 below,
2. If you decide to discuss your concerns with JFSA, you should make sure you
gather all your evidence together Including all relevant documents, transaction
references, helpline references, coptes of correspondence, contact detaits and an
outiine of your concerns and any subsequent discussions with Post Office Limited.
You should retain all origina! documents at this time although they may be
required later,
3. You should provide JFSA with photocopies or PDF copies of all relevant documents,
which will be examined by JFSA and/or JFSA‘s advisers
4. At this time JFSA undertakes that it will leap all information strictly confidential
and neither Post Office Limited nor Second Sight will be made eware of eny
discussions with or submissions to JFSA, JFSA undertakes not to reveal any
details about you, your FAD code or branch location to Post Office Limited untit
JFSA agrees with you that your concerns will be raised as part of the Inquiry.
(8) The Inquiry Route - an Overview
i. The Inquiry will be carried out by Second Sight within a “no blarne" framework.
2. If you are a Horizon user (whether as a Post Office Limited employee, contractor
or a former or existing subpastmaster), you can subrnit your experiences of and
concerns with Horizon for consideration under the Inquiry through JFSA or by
contacting Second Sight at Tythe Farm, Maugersbury, Cheltenham,
Gloucestershire GL54¢ 1HR. You must do this by 28 February 2013.
3. Except In a case where deliberate fraud, dishonesty or Iiegal or unlawful conduct
is suspected, no information voluntarily submitted for the Inquiry in good faith
will be used for any purpose other than the Inquiry. However, Second Sight may
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mation to Post Office Limited to enable Post Gftice Limited 1o
Sues OF questions arising out of the Inquiry.
pass that inf
respond to any
(C) The Inquiry » the Betall
Details of the Remit, Conduc
to this document.
and Output of the Inquiry are set out in the Appendix
‘Talsnw matters further
If for any reason you are not satisfied with the findings and wish to tale matters
further, you are of course free to pursue other avenues which JFSA can help you
with.
Equaily, if Post Office Limited has good reason to suspect that there may indeed
have been fraud, dishonesty or ather illegal or unlawful conduct, It may cecide to
pursue such matters in Lhe civil or criminal courts,
Dated:
Issued by
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APPENDIX
The Second Sight Inquiry ~ the Detail
The Remit of the Inquiry
The remit of the Inquiry will be to consider and to advise on whether there are any
systemic Issues and/or concerns with the "Horizon" system, Including training and
support processes, giviag evidence and reasons for the conclusions reached.
The inquiry is not asked to investigate or comment on general improvements which
might be made to Horizon, or on any individual concern raised (see below) save to
the extent that it concludes that such investigation or comment is necessary to
address the remit,
The Inquiry is not 4 mediation or arbitration. It is not tntended to resolve or affect
any dispute there may be between any individual Horizon user and Post Office
Umited,
The Conduct of the Inquiry
4. Submission of concerns
As highlighted, you can ralse concerns directly with Second Sight, However, you
must do $0 by 28 February 2013.
By submitting a concern you will have agreed that it may be taken forward Into the
Inquiry process, and that as a consequence Post Office Limited may become aware
of the content of the concern, .
When submitting a concern, you should seek to ensure that you Include all of the
relevant facts of your experience of Horizon. You should Include @ written summary
of the concern, alt relevant documents, contact details, transaction references,
helpline references, copies of correspondence, an oulline description of the error
incident and any subsequent discussions with Post Office Limited,
Second Sight will decide whether it will investigate an individual concern In detail as
part of the Inquiry, having regard to the remit. Second Sight may consult JFSA in
connection with this decision. The Inquiry will not consider any concern which
becomes the subject of a clvil or criminal court case.
2. No Blame Framework
Sf;
~ your concern Is submitted in good falth;
- you honestly and reasonably believe at the time of submission that the facts It
contains are substantially true and complete, so far as you know;
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- the concern is not submitted with the intention of making personal gain (for the
avoidance of doubt this does not include the SPMR believing or hoping that
SPMRs generally may benefit from the outcome of the Inquiry); and
the concern does not reveal conduct which is or which is likely to amount to fraud
or any other criminal offence, or which may give rise to a clvil claim
and subject to there being no overriding public interest to the contrary, Post Office
Limited wil! not subject you to any detriment either as a result of having submitted a
concern, Or as a result of Post Office Limited becoming aware of any information
contained within a concern, For the avoidance of doubt, information already known
to Post Office Limited at the time that the concern is submitted may continue to be
used by Post Office Limited for any purpose.
3. Establishment and conduct of Inquiry,
Post Office Limited will pay Second Sight to conduct the Inquiry within a tota! budget
agreed between Post Office Limitect and Second Sight. Second Sight will be
contractually obliged to complete the Inquiry within the agreed total budget, and
both Post Office Limited and JFSA will co-operate with Second Sight to facilitate this.
If the agreed total budget is or is likely to be reached before a report has been
published, Post Office Limited and JFSA wiil meet to discuss options.
All information recelved by Second Sight from whatever source in connection with
the Inquiry will be held confidentially and will only be used for the purposes of the
Inquiry.
JFSA can provide Second Siyht with anonymised copies of any or all concerns to
enable Second Sight to conduct the Inquiry. Second Sight may provide any such
anonymised documents to Post Office Limited so that it can provide input and
assistance to the Inquiry,
Post Office Limited may provide Second Sight with its own comments on any or all
concerns, and on Horizon generally,
In order to carry out the Inquiry, Second Sight will be entitled to request information
related to a concern from Post Office Limited, and If Post Office Limited holds that
information, Post Office Limited will provide it to Second Sight.
Post Office Limited will provide Second Sight with such hardware, software and
technical Information and adrninistrative support as Second Sight may reasonably
require to carry out the Inquiry.
Second Sight will determine the process it will follow for the Inquiry using its
judgment, after censuitation with Post Office Limited and JFSA.
The Output of the Inquiry
Second Sight will consult with JFSA, Post Office Limited, and/or any other party as It
considers necessary before producing any report. No party may introduce any wholly
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new issue or concern at this stage, and the parties will each keep the consultations
with Second Sight and their contents confidential.
Second Sight will consider and take into account any comments received from JFSA,
Post Office Limited and/or any other consulted party, and may conduct further
Investigations If necessary in fight of the comments (having regard to the agreed
total budget), Second Sight will then produce the report by a date agreed between
Post Office Limited and Second Sight.
The report will report on the remit and if necessary will contain recommendations
and/or aiternative recommendations to Post Office Limited relating Lo the issues and
concerns investigated during the Inquiry. The report and recommendations are to be
the expert and reasoned opinion of Second Sight in the light of the evidence seen
during the Inquiry. t
The report may be published. Until it is published, JFSA (and its advisers), Post Office
Limited, and any other party consulted by Second Sight will keep the report and
evidence confidential.
Second Sight will prepare the report so that so far as is reasonably possible, it may
be published without redaction of personal data and/or information that is :
confidential or cornmerciatly sensitive for Post Office Limited ar any Horizon user, H
bearing in mind the primary need to ensure that the report is reasoned and evidence I ~s
based. I
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Metadata
[Filename 5.15 POL Intenm Report Signed(1) pdt T ORIGINAL}
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Post Office statement on findings of interim
report into Horizon computer system
The Posi Office loday issued the follawing stalemunt in response fo the publication of an inten report into alleged problems
with the Honzon computer system, which 'S used lo record transactions in is branch network
The Post Office today issued the following statement in response to the publication of an interim report into alleged problems
wath the Horizon compuler system, which Is used to record transactions in its branch network
The report is beng published by an external firm, Second Sight, who were commussianed by the Post Ottice last year. It
canficms that no system wide problems have beer found in relation to the Honzon software, bul suggests that the Post Office
should examine its support and training processes for sub-postmasters
Post Ottice chief executive Paula Vernells said
“We commissioned this independent review to address concerns thal have been raised about the Honzon system and we
weicome the broad thrust of the mienm fincings.
“The Post Ottice 1s committed to supporting its people and improving the way we do so The interim review makes clear that the
Honzon computer system and ils supporting processes function effectively across our network As the review notes, ils used
bby araund 68,000 people in more than 11,500 branches, successfully processing more than sex milion transactions every day
‘The rewew uncer!
1e8 Our cause for confidence i the overall system
“I does however raise questions about the training and support we have offered lo some sub-postmasters and we are
deterrnined to acicress (hese issues,
“The people who work in the post office network in communes across the country are the Weblogs of our business and we take
‘ur responsibilities to them very serrously
“We therelore regrel very much il any sub-posimaster feels thal our stangards of support oF training have not met their needs,
and we are grateful to James Arbuthnot MP and the Justice for Sub-castmasters Alliance (JFSA) for rarsing these issues with us.
“in many of these cases I am confident thal steps have already been taken which have improved support and traieung but we
are always open to feedback and insights trom sub-posimasters So we wilt make further improvements im this area and take
belter account of individual requirements and circumstances going forward."
The Post Office is proposing to respand lo the Second Sight report with three new imiatves aimed at addressing the issues
raised, improving fulure processes and examining polental structurat changes 'o Support sub-postmasters:
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1 The creation of a working party to work catlaboratively to complete the review of cases started by Seconc Sight last year. This
would examine tne themes idenulied by Second Sight and consider all cases brought forward by the JFSA and MPs, together
with any new themes which emerge from these cases The JFSA have been invited to join this working party
2 A review chaired by an independent figure to determine how an independent safely net might be introduced to adjudicate in
ispuled cases in the fulure Again the JFSA and other stakeholders wall bu invited to take part in thus process.
3. A new Branch User Forum to provide & way for sub-postmaslers and others to raise issues and insights around business, -
processes, training and suppor, cwrecily feeding into the organisation's thinking at the highest level A key task for this forurn wall
be to review support processes and training to ensure they meet the standards expected ol the Post Olice
Ms Vennells added "We have an obligation to protect public money, including inveshgating susnacted wrongdoing. However
‘we hope the action we are already taking and these additonal proposals to work collaboratively with Ihe JFSA and sub
postmasters demonstrate our commitment to mproving the way we support all fhose whe work in our unrivalled branch
network *
View Horizon inten report
Contact - Ruth Barker
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[Fitename 5.16 PO News release interim report July 13(1).docx. ~ [ORIGINAL]
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®aat Office ~ Horizen Syatem
4.28 pm
The Parliamentary Under-Secretary of State for Business, Innovation and Skilis (Jo
Swinson}: Yesterday evening, an interire report into alleged prakiams with the Post Office’s.
Horizon cornputer system was publishad, The report was corarnissianed by Post Gffice Ltd
from external forensic accountants, Second Sight. The Horizon system records ail
transactions conducted at every post office caunter acrass the country, The Government
wealcame the sublication of the interim report and Une Post Office’s staternant in resportse.
Although Post Cffice Ltd is 101% owned by the Government, the company operates at arm's
Jength as an Independent commercial business. The Government uo not play any role in
openstional rnaiters. If is imonrhant to note that the issues in the report have no inpact on
Royal Mail, which is an entirety separate business. It is alsa important te be clear that,
contrary to misleading media reports, the review explicitiy confirms that
“we have so far found no evidence of systern-wide problems with the Horizon gaftware*,
‘The very smail number of sub-pastmasters whe have experienced issues with the Horizan
aystem are @ minute propartion of the tens of thousands of people who have been
suncessfully using the systern across the network of 11,500 branches on a dally basis since
41995, Gut of 68,000 users, only 4? cases have bean put forward te the review.
lwant fe eraphasisn that the interim report atakes no comment on the safety or otherwise of
any Conviction of a sub-pestmaster for fraud, theft or faise accounting. Equally, even if it had,
the Government cannot intervene is the lega! process fa review or appeal past convictions,
These rpatters can properly be dealt with only oy the relevant judicial authorities, The interim
report published yesterday anahygad four cases. It Found that there was onupe for the Past
Office to Improve aapects of its sumpert and waining for sub-pastnasters, and i has aireanty
taken eteps to do su, The Post Gffios has further propesed a number of measures to bulid on
some of the points made in the Secorut Sight report on support and fading for aub-
postrnasters, I weicaurae those initiatives as, I understand, does my right hon. friend the
Member for North East Hampshire (Mr Srbuthnot}, whe has played @ key supporting role in
identifying cases for examunation in the review.
‘Thee Post Oifice staternent Issued yesterday welcarned the dread thrust of the report's
findings and outlined three inithatives to deal with the issues raised. First, ft with set up a
working party to conipleta the review uf cases started by Second Sight, and will consider aif
4? oasme brought forward by the Justice for Subpostmasters Ailance-—the IFSA-—and MPs.
The IFSA has bean invited to jain the working party. Secondly, an independent figure val
JY a review to determine haw best te adjudicate disputed cases if future. The JFSA and
other stekahciders will alse be invited to take part in this process, finally, a new branch user
forum wil provide 3 channel for sith-pastiriasters art others to raise issues at the highest
evel on inisiness processes, totining and support. The cornpany will take forward the
proposais as an urgent priority. I commend this staternent to tts House,
@ July 2013 « Column 199
Lk pm
Yan Murray (Edinburgh South} (Lab): I thar the Minister f
statement and for coming te the House,
This is a disturbing affatr. At @ tinns wher suk-postnasters’ income is being squeesed, the
fast thing they cmed is to lam confidence in the eystam they use to aperate their businesses.
The peopte in the post office network are the Hfsblond of aur communities and must be
the advanced copy of the
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supported in every way possible, A recent National Federation of SubPostmasters survey
ouarating chsts were rising while persona drawings were , arst that one
if SE ars fake no salary from their busireseas, Mast sut-pastrnasters earn litte
ni ne income from either financiat or Gaveroment services, the two areas that Ministers
identify as having ras! growth potential for gast offices. The NFS? rerncved its support far the
Postat Services BHi on the basis of the abject failure of the Government te deliver the “front
office for Govenirnent” services they nramised af the vious atecton, That is what makes
tewlay’s revelations on the Horizon system alt the awre worrying,
T welcome the steps taken by Post Office Lid to investigate tea eMOCAEnE Fal ed by Ue Justice
for Subpostrias: Alfinace and fra right ban, Member re (My
Arbuthnot}. les wekisite has a 4 analysis of cub-postimastens who ditt nothing
wrong, but for whorn alieged dafacts int the syghers biel raauited i orobhanis with cash
reconcilation and processing payments, Press reports this marning say that the Post Office
has adraitied to software defects in the Horizon system, ut the Post Cffice preas release
would have us think that tis is a mere training prokient.
Second Sight, the independent company ernployed by tee Post Office to Investigate these
Isaues, sald that while there was no fundarnentai problem with the Horlzen system, there
were buge in the system that resulted in it identifying defects reaulting In a shortfall of up to
£9000 at 76 Dranches, The Post Office has recagnised, however, that the report raises
questions about the training and support being offered ta some sut-postmasters, This raises:
wider questions on the current seatwork transformation grogramune, Traini cong have
been consistently raised by Qppasition Members, the Select Committee on Busines:
Insovation ad Skills ard Consumer Fotures, but the move ta a Locals riadei could cesutt ir
fewer fully-trained staff In our past offices.
if post office services are merely being administered from the front counter of a newsagent
howe Guarantee that tee servers will be fully trained to engere that the
the Horizor system do not arise be the Riture? The Minister did sat adxiress that qee’
her statement, and the National Federation of SubPostmasters has raised thi e time and
again, it responded today ky welnaming the Post Office statement, bub also sais
“We are encouraged to see that Post Office Ltd (POL} concedes that there Is scape for
Poprovement in its training and support progranwnes—isaues which tie NFS? has raises
rapeatadly with POL.”
This is ait at a tine whee Crown Post Office staff are in Industrial action, the transtarmation
programme & struggling to he delivered, suk asters’ iTmomes are dropping, there is a
dispute with Royal Mail on the segregation of mail payments, the future of the inter-
& July 2023 : Coturnn 200
siness agreement is unclear due te Roya! Mail privatisation, and Post Office sentor
managament have awarded themselves bonuses of more than £ fier,
What processes will be pet In place ta compensate sub-postmnasters and former sub-
posernasters whe have been disadvantaged, fined, fost their businesses, homes or even
jaited, a: of tee problems with the Horizon systern? The Minister said that the interte:
port makes no comment about any convictions, criminal or otherwise, but vali thase seriaus
sues be dealt with? When dig the Govecirmuent know about this Investigatian and tree
problerns wittt Horizon? How will she ensure that af steff are adequately trained in the
transfer to 2 Locats model? Can she confirm or deny recent reports that there are ongoing
$ to change the voluntary Locals network model to a compulsory model, due t the siow
take-up of the transformation?
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Jo Swinger: I thank the her. Gentleman for his wide-ranging remarks and questions, He is
right to say that if is important for peepie to have confidences in the post office network, In
terms of tore, I understand that the rernit of Qopasition is to ak questions and te be
chatlenying, Gut it is important that we do not talk the Post Office down, Members on both:
sites of the House recognise the vital rote that post offices play in our communities, that they
are Going an excellent job and that there can be a bright future for the Pust Office. This
Government have stopped the dactine in the numbers In the post office network under the
previous Governmant. The han, Gentieman will be aware that the Post Offion has wor 10 out
of 10 Government contracts recently. We want niore income for Post Office Ltd te come
through Governenent services. If has a quod record of winging contracts,
The hon, Gentleman mentionad the ouges in the system that have been reported in the media.
itis important for the House to have clarity on this, because there are bwo separate issues.
The Post Office itself identified issues an twa aecasions: through a routing systenis check and
ag 3 result of a query from a sub-pastmaster, That fed to a small number of transactions
being queried across 76 branches. Post Office was proactive in identifying and rectifying
thuee problems so that no sub-pastmaster was cut of sachet. That 8 @ separate matter from
the issumas considered in the repart, and which were raised by the JFSA and Sacond Sight. Ne
systenr wits suftware issues were found. There were issues relating te Qu: interface for
dealing with reultinie coraputer systems, The training or: offer, anc the helpline that aute-
postmnastars can call f they have a problem, were identified as areas for knprovernent.
The hon. Gentieman asked specific questions on compensation. There is no new evidence of
further probleras. Where the Most Of has identified de . Ruib-pastmnasters have atresdy
rencivert corspansation to right underpaynvent. Or convictions, it is wp to individuals to go
through the usual judicial processes if they are concerned about the safety of a conviction,
and that can be done through the Court of Appeal. Ciearly, if any evidence were te came to
light that hac an irapact on the safety of convictions—I streas that that has not happened as.
2 rasait of this interim report-—Post Gffice Lit woukd fave & duty tu look ferther at these
> ISSURS 4S & prosecuting authority te enaure tat convictions remain safe,
July 2013 : Column 201
The report was commissioned hy Post Office Lid, but the Government were aware of if and
there have been meetings with MPs in the House at various points in the past couple of years,
On the transfer te the Locals recdel, ( confirms that proper training vill be in place, Customer
satisfaction in the branches that have already gone through network transformation is.
significantly higher, and the experience that customers have is important, We are looking to
ensure that network transformation continues and is successful, but any discussion an its
future wi be done in corpunction with the National Federation of SubPostmasters te encure
that we save ahead with a plan in which everybody has canfidence,
Mr James Arbuthnot (North East Hampshire} {Con}: I thank my hon, Friend for making
‘ttis valuable staternent fo tie Hause, Does she accept that the Post Office, which has acted
highly commerniahly in commissioning thts independent review, has a ounflict of interest—ar,
cather, @ canfliict of duty—in both looking after its sub-postmasters ara protecting public
money, and that the review has shown that it has faites too far on the asset recovery side af
that conflict? Does she agree that it is essential that the work that needs to be done Is not
only relependent, bub seen to be independent of the Past Office? Does she aten agree that
same sub-pestmasters would never have been prosecuted, saad or cleciplined hed the new
procedures now in place oF propased been in effect earker, and that we must look after them
and try to provide them with redress, perhaps through the Criminal Cases Review
Commission?
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30 Swinson: [ sincerely thank my right hon, Srleret not only for bis question arnt carnrments,
but far nis wark acting a6 a collecting gaint for some of the concerns. Importantiy, it ensured
that cases could be looked af anonymously and confidentially, meaning that nebedy had to
fear bringing them forward. That has played an essential role in this process.
Post Office Ltd is the guardian of large armeounts of public money, and & ts iewortart that it is.
properly looked after, but that does not mean it cannot also support sut-postrnasters in
ensuring Mat their systems work property and enaure that there Is reconditation and that
things tally up. In fact, { wauid argue that those are complementary duties, because ensuring
that sub-postrnasters ere well supported helns fhe Post Office with its role jn toaking after
public money.
itis important that any further work is not only independent, but sean te be independent,
ane clearly the role of Secand Sight in that Is important, ag is the role of the IRSA, f would
net go as far as my right hon. Fiend, however; there is ria evidence to suggest that any
cenvictons would have been different had these processes and training syatems been in
place, particularly given that in most of the prosecutions dealt with in the report—not alt 4¥ nad
cases in the report resulted in a prosecution—the sub-postmaster pleaded guilty in the first
place, if is difficult to secand quess when somebody has entered a guilty plea
Mikes Wood (Bathey amd Sper) (Lab): I tank the Minister for ber statement. She chresses:
the need for Independence in the continulrsy process of locking at the outstanding queries:
and tasues, and ro doubt she 5
@ July 2043: Column 202
mindful that when the Poot Office taike about Horlten, it dare not just rnean the software in
the computer aystemy; it means the wider issues, including the Interface between that system
and other systeme; training staff haw to use it, and se an. Given that che hes made a
commitment on the need for independence, wif! she assure the House that if we are ta move.
to 3 working party to continue the pracess, Secon Sight, which nae done such guod wark up
te now, wil be part of it?
Jo Swinson: I shall happily give the hon, Gentlernan that assurance. The continugd input of
Second Sight is incredibly Inpartant, given its familiarity with the case sn far and the fact
that & enjoys the corifidence of many of those inveived, It is aise impartant to recognise,
however, that to date thie system has handled more than 45 bition transactions and that
there have beer Issues with: only & tiny, tiny number of them. As the report ftesif found, the
vast majonty of sub-postrnasters in branches were at feast reasonably happy with the
Horizon aystet, J suspect that Members wauld say that, where IT systeros are cormerned,
“yaasonabty hy ‘obably as Quod 45 we are gaing to get. Generatly, it is wor welt,
hut we need te ensure that the Rerthar work on cases where there are outstanding queries is
independent.
Mr Jonathan Djanogly (Huntingdon) (Con): Cleariy, i bas naw bean ascertainad that the
Horzen systers has prabierns, even if, as the Minister says, they are not systemin, Gees she
not feel that that is unacceptable, howe iver the dalays from Post Office Led in working
out what went wrong? This matter has meandered on for years, resulting in sestous
reputational damage risks to sub-postmasters, Wil she give us her views on whether that is
acceptable?
Jo Swinson: It is to the Past Office’s crenih that it has commissioned this independent
a problem and to try to sween these tings under
be open about ff and to ensure that the repert was publism
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branches contained an article encouraging anyone who had difficulties ar queries they warted
to raise to ensure they were put inte the Secor Sight review.
The Post Office has taken significant steps to ensure that there is transparency and
accountablity and that people’s conzerns ave taken forward. Clearly, sotustioves these isoues
take time, and of course there are fessons to be learned. Impravermants will be mare to
ensure that when queries are raised, they can be investigated more thoroughly, bart again I
bighlight the context: we are dealing with @ system that processes billions of transactions, so
it is very complicated and it cannot be expected that nothing will ever ga wrong; what Is
important is bow the orgarisation respunds wher things do gn wrargy.
Mr Keven Jones (North Durham) (Lat): being a Minster allows the hon. Lady nat only to
45K questions but to right wrongs, Ta dismiss cases such as that affecting a constituent of
. Me Tom Brovwer, as minuscule dees not change the fact that he has inst his livetthend,
his wife has dled, his narne has been dragged thraagh the focal carummity and he is stifling
awaitting
9 Ruby 2043 < Colum 203
an outcome from the Post Office. Ne was arrested by the potice, but they did not take the
case forwand; Sve Post Office did. His quod name is now being questioned, he nas had fo salt
is hesige anxt is si waiting for the Post Office fo produce tre evidance. 1 arm sorry, but the
Minister's statement has done none of the things she could have done te put right some of
thesa wrongs.
Jo Swinson: I appreciate the situation that the hon. Gentleman’s constituent finds himself
in~it Js innportant that he is speaking up for him—and f understand that this has had a
massive impact on theag involved. When I referrad t “minuscule”, I meant the mamber of
transactions queried out of the overall nurnber of 45 bition. I do not Know the details of the
individual aes, ao I hope he will appreciate that it fa therefore aifficult for me to comment,
What is raportant is that we have an independent procedure ta get the anawers that people
such as his constituent are looking for, ane veryane involved must have confidence in that
procedure, i knuw that there have been meetings af MPs and that die IFSA is involved,
gating those answers is important, but it i aise important to stress what the report shows,
rather than to suggest that it contains things that it does not.
Mr Robin Walker (Worcester) (Com): I welcome the Minister's staternent, particularly the
coeinaitnaant from the Past Office to improve aspects of tts suppart and training for sub-
sostmastess. I recentiy visited St Johns post office in Worcester, which is an enthusiasti:
early adopter of the network transformation orograrnme. Wil she join me in celehrating the
fact that the Government are investing in the past office network, rather than running a
closure programme, as the last Government did?
39 Swinson: I very rnuch welcome my hon, Friens’s comments. He Is quite right that the
Government are inves ne the pest affice network, and f knuw fram speaking
to Members an both sides of the House that where Ueece new madels are open and working,
they have hat a really positive reanting fram comsurners, The Post Office bas a bright future,
but part of that is about ensnring that where i properly vestigated,
That is what this independent process has been doing, and that is why we are discussing It
today.
Mr Mike Weir (Angus) (SNP}: The suriber of suh-postmasters affected might be smatl, bul
Horie the less it has fed to terrible consequences for many of them, One reason many peaple
pleaded guilty, paid back money or had money taken off them by the Post Office at source
might have bees tte latter's insistence thet tnmre wes absotutely natbing wrong with the
system. 2 has now heen proved that there is doubt about at least part of Gre system, 60 is
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not imperative that all these cases be dealt with speedily and that justice be done for these
sit postraasiers?
Je Swinson: The hor. Geothamart ig right that if is imperative thet te ases be focked at
speedily, although I think he wauid alse agree that that needs to be done comprehensively,
and clearly when forensic accountancy work is going on, things can take time. We need to be
clear abut what the report cays about the Horizon
9 July 2643 > Calumn 204
system, It did not first evidence af systeriic fathires; that is not to say there has never been:
4 bug in the system, but f defy anyone to find an (7 systant that nas omver had a oug, Wh.
ig important fa that when bugs are found, they are dealt with and the problems are rectified, Ei
What bas nat been found, however, 's any systemic problem leading to the issues faced by
sub-postraasters, although there have been issues with the support and training provided
alongside Horizon, ee
Jonathan Lord (Weking} (Con): many colleagues, I have 4 constituent, Mrg Seema
Misra, whose Hifs and fanidly ife fs in ruins after euffering reputational damage and ceontving 4
custodiaf sentence, I see from the Minister's statement that an Independent figure will chair a
review to determine haw best to adjudicate disputed cages, hut will che assure me that the
working perty set up to complete the review of current cases will aise by chaired by an
independent figure? That is important.
Ja Swinson: Yee, fam nappy to give my hon. Priend en assur
will be indepercent. As I have already cordiemen to th
Second Sight, which is independent of the process, 1s
ce that the working party
the cont ng Invalvernent of
dial as part of that working group,
My Russell Brown (Dumfries and Galloway) (Lab): The Minister has said that the
network Is working well, Wil she share with the House the numbers of sub-post affices that,
are temporarily closed or have had te move to an alternative, temporary service detivery
aysteni?
Jy Swinson: f will certainty
writing. As he, and I hope th
re that that Information is sent te tie hon, Gentiernan ir
ise, wi! appreciate, Husse numbers change 1
thelr very nature. To ensure accuracy, I wil write to him: and place a copy in the Uf le
What Is important is that we have @ commitment to maintain the network of post offices at
14,800. We are ensuring that we invest in the network, rather than ernbarking oc closure
programmes, whith, as now fram my constituency and elsewhere, unfarninately had 3
negative impact or the past office network up and down the country.
Andrew Bridgen (North West Leicestershire} (Can): Having been involved in this issue
for saroe Uroe and having initially been tok by Post Office representatives that te Horizon
software system was perfect and coulis not be infiitrated, 1 ara pleasad thet the Post Office is
co-operating wilh the indepandert investigation, whose Interim report ineiicates that the
systam is clearly nat perfect. { urge my han, Friend to ensure that Second Sight contihwes
with its investigations, Does she accept that if the system was perfect, the modifications
would not be needed and many—ar same~—of the historic convictions may well bs unsafe?
Je Swinson; I certziniy agree with my hon. Friend that no system is perfect; perhaps io
Di of 4 hostage to fartune for ‘one fo peachalih # system ag perfect, f would mat agree with
the second part of his question—that that therefore means that those convictions are ae
aisvicudy unsafe. The evidence fs nat there in today’s vapart, out if evidence emerges to
suggest thal, Guare are fagal channels that can be followad te ensure that tose inguas are
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Huw Irranca-Davies (Ogmore) (Lats): It seams to me that two groups of sub-postmasters
fail outside the remit of today’s statement. The 47 past cases brought forward by the Justice
far Subpostmiasters Alfiance yilf Qe taken forward by the independent working party, but
what about somebody--1 have ene such case in my patch —who for vary good reasons does
not feature in thase 47 cases? Cari that be jooked at again? Secondly, what shout live cases?
The statement refers to “disputed cases in future”, Dut I have two live cases In my
constituency that do het fait within anything Urat has been descrivad today.
do Swinsom Cleany the procedures that the fost Gifice is putting In place te iraprave its
training and support wil, £ hope, ist those oases that are Hve at the moment. On the hen.
Gentieman’s first point, i can certainly give at ass: that ff there are anther cases that
need to come forward, we would not want te deny those people the opportunity for that to
happen,
David Mowat (Warrington Gouth) (Con): For the purposes of clarity, can the Mirdster
confirnt that alt the lasues we are talking ahout today are nusiness, process and training~
yalated, and not software-related? is that what we are saying?
Jo Swinson: Yes. The report mentions a couple of bugs In the Horizon system, which the
Post Office proactively frind ard rectified, but basinaliy what it has found to be lacking in
Horizon is sot the sofaware, hut the sugpert and other issues around the software.
Cathy Jamieson (Kilmarnock and Loudoun) {Lab/Co-op); The Minister has given some
full answers to the questions posed, but she was unabie to give a direct answer to one of the
questions put by avy her. Fiend the Member for Edinburgh South (ian Murray} from the
Front Bench, Lat ma give her another oppartunity to confirm: whether tux Goveoineet art
Peat Office Lid are considering changing the Locals programme from ia voluntary to &
compulsory basis, A simple yes of no answer would be adequate,
Jo Swinsen: { am atways keer to be concise. } think 1 did answer the question earlier. 1
pointed out that the transformation pragramme is an important part of the Post Office’s
future. We ara making sure that welenk at how i will be dedivered with the nev strategy for
the Post Office Uiat wilt published, and we are working closely with alf the stakehalders to
ensure we can do that, What ix important is that whatever ie future eystern fooks ithe, there
will be a choice for sub-postmasters, rather than forcing them dove a partiouiar route
Mr Philip Hoflobone (Kettaring) (Can): Being & sub-postmester is a very worthy
profession, at the heart of many focal communities and helping highly vudnerable people,
With respect, I think the Minister dismisses toc lightly the devastating impact that the
Horizon system has had on a smatl number of peaple, The very least that Post Office Ltd
should he doing is setting up a fegat fund te review each case, because many with have
pleaded guilty to false accounting, given the situation with the systern ans the lege! advice
they received at the time.
Jo Swinson: I abschitely recognise that the Impact un indtviduats has been intensive anc
considerabie, and I tink I have made that point to other Mernbers whe have raised this
issue, Constituency MPs are absolutely
8 July ZOLS x Column 206
representing their constituents in taking forward these proposals, but I think there is a
distinction to be drawn before assuming thet convictions are therefare unsafe, It Is Inpartant,
that we draw that distinction and that we are careful about what we say, particularly when it
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nas to jegal proceedings that have teken piace cutside this House—~ard rightly
independently af this House--and where peapie have entered 4 particular plea.
if individuals are coneariad about the quality of the iegai advine they received at the tow,
there are routes far them to chaffenge that, such as the Legal Services Commission. if
evidence comes to fight that materially affects the canviction, that would afso nead to be
locked at by Post Difine Lich as the prosecuting authority, as I have sald. However, that is nat .
where we are yet. We will of course samain open minded about that as the review process :
continues. So far, only four of the 47 cases have been looked at in deta, Therefore, we await ‘
te see what more wii core aut of the review,
David Simpson (Upper Bann} (DUP): I thank the Minister for her statement. She will have ete
heard a qurriber of Members gutting information before the House ahout the tyes that have
been ruined. Iduatice hag Seen done, and that neers to be correched. Wit she tell us the
exact details of the training that Post Office Ltd intends ta carry out
Jo Swinson: Training Is carted out as 8 matter of course when new pastmasters join the
petwork, That can vary bebween 2 fftic over two weeks to three weeks. The Fost Office is
now enauring that it visits new sub-postmasters after one month, and again after three
mornths for the new local and main operating models, to deal with any teething issues ar
further questing that have arigert from their working the process for a few weeks. ee
Impravernents fo the helpline are also important, se that t does what f says on the tin and is
actualy helped fo peopte who call i, One ig that has improved the heipling ta making i
avaliable for extended hours, As other Members have mentioned, subr-postmasters work vary %
hard for jong hour's, so assistance needs te be avaliable te ther when they happen to be
daing their reconsitfation at the end af the day, That is not tikely to be within office hours, sc
the service reeds to be avaltabte after brarcteas have closed, Thoae are jost some of the
impravernents that the Post Office hag been makiog.
Mr Peter Bone (Wellingborough) (Cor): I thank the Minister for coming te the House and
making today’s statement, She is an excelent Minister, but on this eccasion she nas got ih
wrong, indead, 1 think she got the mood of the House wrong. The Howse Is cancerna
3 very small sumber of penple wha have tad thar ves ruined. It fs no gond saying,
they can appeal,” or that they can do this or iat, We need proactive action fr
vernment, i suqjest that she tiadk to ter Att y Geranal te see whether he can look into
those cases and review them,
Je Swinson: } thask my fon, Friend for that question and for fis Rind words, ) accept that
this is @ serious issue for the Individuals involved, and it is absolutely natural that their
constituency MPs are putting thefr cases, However, we have to be careful about going from
the orierstaniakis sympathy for individ it @ difficult pasitiun to an assumption that ei
these issues are
9 July 2043 : Cofurmmn 207
therefore unsafe and the reautt of problems in a way that is mot borne out by the evidence jo
the report. That is why ft is important t have a continuing Indepersient reviaw process in
whith people can have confidence, tut if is alse Important t6 go by the evidence found in the
report.
John Woodcock (Barrow and Furness) (Lab/Co-op): For paw I
and many athers going to have this appalling ciaud hanging over
@ trae Hodt on the next stage of the review?
my namebitaeant,
wan? Has the Minister put
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Jo Swinson: The caview is inmependent of the Gove nent acct of the Past Offire, gp it
waidd not be approariate for me of for the Post Office to put an arbitrary dime fimnit an it. That
said, I absolutely understand tts hon, Gentleman's pair that there ix.a need for speed and
for the prompt resolution of these issuas, but that hus to be belariced against ¢ Gj that
they are looked at In 4 comprehensive way. The independent working grou, which will
include representation from the Justice for Subpastmasters Allance, will help te ensure that
that happens swiftly acct without camprornising the details that raed to ke yore into.
Jim Shannon (Strangford) (DUP) rose--
Mr Speaker: The hon. Member for Strangford (1
corpmart sractice, af the last rf
hannorn) has bobbed up, as is his
» ET chouid mot gant dim ta fee! exchided.
Jim Shannon: I have bobbed up at the right tine.
i thank the Minister for her staternent. The Horizon system has been blamed by some sub-
pasimasters whe have bean accused of faise accounting, Goes te Minister agree that red
tape makes it difficult ta run rural sub-past alfieas, especially those in isolated fecatinna?:
What steps is she taking te restore confidence in the eystem, especially in radatian to surat
gost offices?
Je Swinserm The kon, Gentiernan is quite right ta raise the issue of rural sub-pustmasters.
The communications systems depend an communications technalugy, which can be more af
an issue in nural areas, Many post offices have a rein ghone ine and also a keck-up systern,
Derhaps using a mobile telephore. Rural areas often have difficulties vdth oroadbard
connectivity, which Is why the Government are moving ahead with plans to ensure that rural
broadband is much better spread out, The support fer rural past offices is certainly
sigaifinant, and we recognise that there are many branches that need subsidy from the
Government to cantios. That is why the Goverment are injentieg £1.34 bilion into the post
office network. We aisc recagnise tht there wit be a continuing need to ensure that rural
post offices are supported in providing thet excellent services, They might be the fact
ramaining shop in a village, of the only post office serving a large, far-fiurny ares,
8 July 2043 : Column 208
Pottts of Greer
244 pm
Huw Irranca-Davies (Ogmore) (Lab): On a point of order, Mr Speaker. 1 welcome the
Minister’s statement, and £ think I ufiderstood—it might have been ry hearing—that she
made an offer to look beyond the 47 cases raised by the justice for Subpustmasters Alffance,
{was not clear, bowever, to whorn any further cases should be referred. Perhaps, while fhe
Minister is stlif in the Chamiber, you car guide us on how we might get that clarification.
Mr Speaker: The failure of the hon. Gertieman to hear what was said does not, in Heel,
constitute a paint of order, However, ag the Minister is stit here and looks happy to come
back to the Dispatch Box te clarify the matter, he might be refaased fram his ignorance
before very long,
Je Swinson: { are suse that the hon, Member for Ogmore (Hiaw Lranca-Davies) would have
bad the ingenuity to ensure that any such cases recetved attention in any event, but for the
benafit of the House, I should point out that one avenue for highlighting any further cases
would be to bring them te the attention of the Justice fur Subpastmasters Afflance, which wit
he part of the independent working group. I hesitate ta suggest, although T am grotubty safe
int dning ga, that my right hor, Pend the Menvber for North East Hampahire (Mr Arbuthnot)
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would also be happy fo continue jn nis rele as a recipient for any such cases, He seems to be
nodsing. So those are hw options for the han, Meniber for Qymore,
Mr Speaker: I tnist that the han, Gentlernan is row satisfied. He does not have to suggest
that His ear is sumenow defective, I feel sure that it is not, He might simply not have bean
paying full attention: I do not know,
Mr Christopher Chape (Christchurch) (Gon} rose
Mr Speaker: 4 further poirit of order. It is point of order day!
Mr Chope: On a point of order, Mr Speaker. Ie it within your power fo require the
Government ta provirie ime far the orege: scrutiny of Governmerd. rneasures before Uiey are
subject (aa vote? Cerarnand paper 4671, to which the Hume Secretary referred in her
statermnt, cooiprises 155 pages of pretty Impenetrable prose, with hardly ary explanation.
The onranand paper has considerable po! replications, but there ane many ifs and buts:
among the contents. I cannot see haw the House can raasenably be expected to reach a
substantive conciusion on whether signing up te the document is in the national interest
unless we are given a lot more time for ite scrutiny, not onty by the House but by the Select
Commenittees, which are appuinted specifically to do the fob of scrutiny.
Mr Speaker: The short answer is thet I do nat have the power to which the hon. Gentleman
refers. I much appreciate fis belief that the Chair ought te be invested with greater powers,
and I do not for one moment dissent from that proposition. The reality is that he and
@ July 204% : Column 209
others wil have ty use thelr best endeavours in the cuming days—tit fs fiteraily a matter of
days-—to ensure thet they ars furnished with adequate material, and understanding thereof,
to enable them to participate to their satistaction in the debate that the Goverrenent nave:
apparantiy now schesuten, n oparate only within my pewers, but T know that the non,
Gentleman ie a persistent, indefatigable and skilful Member, and J om sure that he will make
the very best Ast of this, not only ort his own Gut with others.
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#64,4
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#360.1
Metadata
1
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Post Office Media
Post Office announces independent mediation
scheme for subpostmasters
Howes Refomse Aug 26, 2025 23:00 BST
duction of schame part of Past Crfioe’s comry
system
inienm report into Ho
{to addre: Sconce { Dy Sub-po:
support pracea
Post Cfice
apendent medi
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posionas ier: Passe Ob
eonoe
The Posd Cifics:, A (bastiog for Gub-posimasiers Atianog),
indeguanithay tors, have fornict a workin
fs avariab .
Arupshe warn ces
eis comreltied to aeiel
ly and trenaperen’
ne an independent review which racently
Phere was no evidence of any
myslenne i ify nore further improvernents we could .
make to our lang and supuel arrangements, which we are taking forward.
in addithan, the indesensiant ma 2) SCHOINS WE BE aNPouts today wif
way i 688eS6 and atkiess any outstanding cages where
Have bean undatly Peatecd
fg ate the Heblood of
iy. We Rome tes package af mee:
Milind io working closely w
ave very plaased indeed with thew
gio aubiit an application should vi
intormation:
The Post Oific
aint at
yatential
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Po. 0080388
In aidition to eslablishimng tive independ nediation aaher
work started by Second Sight
A working group fees
been created to build an i year and to dev:
info this rnediation scheme
Anew Branch User Forum is alse being established i: provitie @ wary
postmasiers and others to raise concerns and insights around busi
ining and support, siren
level 4A Rey task for this forura wi
iS POCOSRES,
arieation s dunking ai
ne highwat
9 te
+ Feview Suppor Processes and trains
he Post Offios
OF DOO users and processes more than six millon
arsacions every day. The total nuniber of o:
Shght as pari Re BRK
of users of the Horizon systan:.
The mediaion process wil be open both io aubpostmasters wha raised concerns
sematives frarn
to take part in the
group compr
ond Sight Any subpostmasiear wishing
wd Sight which wall review each
“gt
les
s JPSA, and Se
Lan application thrmugh
rhe ust subr
far ehgit
acl - Post Offiee, Proas Office
About the Post Office
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#4141
Metadata
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Initial Complaint Review and Mediation Scheme {te he knmwn aa the Scharne}
As you vall be aware, Post Office has been undertaking an independent review inte the Honzon systern and associated
issues,
Post Office ic determined te ensure thet Horaor end any essonated processes are faw, effective and reliable. and that
Subpostme act haye confiderice i the system,
fn some instances. however, Subpostmasters altege that Past Office and Horgan haw:
address these concerns, Post Office appointed meependent forensic accountants, Secon’
situation,
t met these standards To
Saght. te investigate this,
fn collaboraticn SA} and a group of MFs led by the Rt Hon James
Arouthnot MP, Past Gifice established an Inquiry inte Horizon, was appointed te lead this Inquiry and
hay bean working with a number af Subpastmasters for over 12 months. A copy of Second Sight's interim report ix
available at hindpaw paatatfice coubveust-wifice stator
Post Office now wishes to offer a Scheme to Subgestm. og that indvidual Sudmpostmasters have an opporty:
te heir concerns directiy with Post Office. in partnersiup Subpostrrs 's, the JFSA, Second Sight a:
interested MPs, alf cities can then work towerds resalving thase concerns.
ty
Please find enctosed a pach of documents describing how the Scheme wil work. We would be grateful if you could
forward this fetter and the enclosed pack to any Gubpostmasters who you believe may be witerested in: this Scheme,
if a Subpostimaster wishes to take part in the Scheme he/she shauid:
. Carefully read the information enclosed wath this letter,
* Complete end return an Applicaton farm which can be found at yuan itses
aK
f: the Scheme and they may leave the Scheme at any
rights: vail reenam im full force, whether or ned they choose to enter He Scheme
A Subpastmaster’s Application must he receted by Second Sight by Manday 18 November 2023 if they wash to he
involved in the Scheme.
Th Her has been cent io a number of interested parties. ff 1s therefore possiale that s Subpostmaster may be
notified of this Schame mare than ence. but the Sutipostmaster should only make ane dyypicatin.
Yours faithfully
Angela Var Den Bagerd
WSS BOAOTEICLCOBK
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aT _
er a ee eee
HAS, BOdet ony SeAtherRent oF agrecined? yay mame with The Post Ofpce,
se fore
F man stipe any dsalfen ted tampa sten
SRURIAG AES win hops you, under tan a0t ef et sud fram faking tocnyvaRE, ESPECIEHS fu
Rouging eve i Sane fone any setleeneet fs aground oF whether t's sigced as port af site settlement, 1408 nog
Whine Us nad eter ost is tether the
a tid Hears Semmes wos
IES it Atel Heel hopes} get sone mustey Hack, but yoxe wont de adie he oiatest yews anticenice OF tot the
agreement af settionien,
eer assurnang 2% aaky signed 9
stony 9? wise? Rapprnes te ye 2 gaping, ene
“Ske
#1244
Metadats
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Nick Wallis Biog 9/9/2014
sy hates tatty, Coosa
seiscer elit at
sit reading Mase gah slots NM Ae Rae es Eagradontned fase NE ENE gn acis i at wns
wisvee anny cutter ig nega ak wnt share a ent a
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et by Rach aga fe Rowe Exot
wenanseniyies
Eomearas ome
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#336.1
Metadata
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Sir Anthony Hooper appointed as independent
chair of working group overseeing initial
mediation scheme for Subpastmasters
Bross Keferse Bet 29, 2013 60:00 GMT
vide ie
ip and acru:
iting a fooum for tte resciution of
any orininal @
dlamiging
sy desues af Jaw and fact. He ales presided in the Divisional Qourt. Sir
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on te
cB
ineruhigs sah We
# the Works
be Invaiuable.
Ghair
ei ONDerns
ine wae establish
owing the pulloaiion of dy
Sight in Juty. The: mapnort slated that se:
is (systemic) problenia with the Herizon sofware nad
& Movizun syatern produced by Second
far no evidence of evetam wid
peer found
{thal improvements could be mace ii the freind
fided to aubposinastars. in taponse ia ihe reps:
8S, Ong Of whieh was lo create 1
fee for Suk;
Wg and sue
the Post Office
lation
co}, and Second
fram bis congderable oxcenence ¢
those the cane reviews will be di
g with.
Subpostriaas ishing to subi en apohcation should vied ffeaorgads for fur
The Post Off
aéned at address
poten’
3 Pew initia!
OS
# enaminng
siructural chart
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fimechetion schema. a Working Group has
by Second Sight fact year and to develop it
in adkiition io establishing the indepenct
on ihe we
been created ts by
ics this mediation scheme.
wh User Foor is
a
2 3 lablished to pr
posirasiars ari others jlo ral 4
ide a way for aub-
tS @round business procees:
support, directly f 0 one ti
HIG aN
javel, A kay task for
ey meet the standands expected
8 forum: will be ta review gugport groceases and Laming to
s Past Offa
ensure
thar six oie
The He o has arcu 68,000 users and processes nua
lrangactions
Sight as part for ite ¢
Ot SYS:
avery day. The iolai
Of oases cad forwart by use: Src
. fogs than 0.1 per sant of the total number
ternal review
ee concerns
adiahon process wil be apen both io aubpostmastons wher.
traugh the Seca Sight review, and also any who feel they have a dispute 4
Horgan system (or ar avsocat.
involve cages bewy independently my
appt a, ky a fa fac
subpar
Y supervised
SA, and Sey
the scheme niust submit an application Hrough Second Sight which wil review:
each case ior &
Jap ite POS OTIGE Ge
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#70.1
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Post Glficw Listed
488 Old Street
Rt Hon Janes Arbuthnot MP
House of Commors
LONDON
SWI1A GAA
26 November 2013
we agreait ta arrange a date th discuss the progres: iS
1 he Post O) made following the publication of the Second
Report. Alwen wl be sh teach with Janet to find a suitable date in the first part of
mary,
I should like us to be able to u
way we engage with s subpost
or: them
u both on the improvements we are making to the
ke their feedback and support them wher things
atier, we received 144 applications by the time the s ser
Navernber. The Wer 5 chaired by Sir Anthor per, has agreed a process to
aluw a praper investigatior rs accepted so that it can rnake an mformed and
evidence based
process, it may
rnediation stage whieh is wy ith: ink
rather thar earlier. fn the meantinia, f the
hesitate to fat
Ss to raeat in the New Year
need to know, please de not I
know.
{ look forward to seeing you and bope that in the meantime, you will have a good
Christmas,
vivew pastotficn co.uk
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Metadata
‘Pilonarne “TS 31 Akien Pecking te Saastows @ Now 2003Cy pdt
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Mr Nick Wallis
C Broadcasting House
id Place
5 December
Dear Mr Wi
Information regarding Farmer Past Office Agents.
i refer te your emmad to Ruth Barker dated 5 Gecermber 2074, in which you assert:
Ya the cases we are looking inte, the commen thread is a complete GF arty
eudence of deliberate were fet alone proof of srroiaal activiy. Some have
compeliiig evidence they ave innocent of any crite ov negigence. Sore aise have dear
i manie dy Horgan.”
ary) to “whic nit
4m respare
Please pass this fetter or
look forward to your pro: sap I reply.
Radric Witliaras
Solicitor, Fost Office Limited
seanagersbatting cms
eon, LAY OHO.
sat Wanns, Sci iihted Bites 168 9
tke
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Bick Waite Des 20143. pdt
Fikenaee
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FINAL NOTE OF MEETING BETWEEN POST OFFICE AND RT HON JAMES ARBUTHNOT MP
28/01/14
930 - 1030
Attending : James Arbuthnot (JA), Alice Perkins (AP), Paula Vennells (PV), Janet Walker, and David
Oliver
Alice opened the meeting setting out that there were two themes that she wished to cover :
* The current and future running of the Post Office
® The mediation scheme itself
For the current running of the Post Office there had already been a number of significant changes
and there were more in the pipeline. This was very important as it effected large numbers of people
and acted as a preventative measure to ensure that we did not face a similar situation (as that the
Scheme was dealing with) again.
For the mediation’ scheme it was moving forward more slowly than we had hoped in part that was
due to it receiving more than twice the number of applications and in part as Post Office were
investigating the cases extremely rigorously and using the first wave of cases to ensure that we got
the process right and that this was an area of particular concern to the Working Group chair Sir
Anthony Hooper.
JA thanked AP for her comments and observed that he had received feedback on AH that he was a
really good man doing a really good job. PV commented that she was giad of that fact and that AH
was also being tough and challenging to Post Office and that she really valued that.
JA then moved the meeting on to an area of importance to both him and other MPs. JA questioned
how they will be kept in touch with the scheme’s progress. JA set out the need to reinstate the
meeting which had previously been due to take piace in October between Post Office and MPs. JA
explained that he was beginning to get calls to bring this meeting forward particularly, as he was
aware from Second Sight, all of the MP cases had been moved into the Scheme and MPs had not
been updated on them for quite a while.
AP responded that the communications with MPs were a very good thing but that we needed to also
ensure that the mediation scheme was allowed to progress. JA suggested that the meeting could be
held before the first cases had exited mediation and could update MPs on both the progress and the
process that was underway. It was agreed that this was a good idea. PV talked JA through the
timescales with the first cases not due to reach mediation unti] March. PV also suggested that the
meeting with MPs would also provide a good opportunity to talk them through the Business
Improvement Programme and the steps that have been taken with the existing cases for example
325 cases had been reviewed for disclosure, 21 further disclosures had been made and to date no '
appeals had been received.
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JA commented that he was very impressed with the general approach that Post Office were taking.
PV commented that Post Office were taking the issue very seriously and that was why they had
committed 22 investigators, funded professional advisors for the applicants and funded the
provision of an independent mediator.
There was a discussion of who else should attend the briefing with JA suggesting that JFSA and
Second Sight should attend, Post Office undertook to consider this and canfirm to JA’s office.
ACTION Post Office and James Arbuthnot’s office to arrange a meeting with MPs and Post Office.
ACTION Post Office to consider additional attendees particularly JFSA, Second Sight and Anthony
Hooper and come back to Ja’s office early W/C 3 February.
The handling of the meeting was discussed including the need to avoid skewing of any particular
case through lobbying. JA commented that he thought that MPs would wish to raise compensation
for specific cases particularly those where Post Office had dropped a prosecution at short notice. In
particular JA cited the case of Kevan Jones’ constituent where Kevan had reported that Post Office
had first lost the case file and then dropped the case. PV commented that she had not heard of this
issue but would look into it. PV stressed that JA should always feel free to raise issues of that sort
directly with her.
ACTION Post Office to talk to Janet re the letter inviting MPs to the meeting and agree the “ground
rules” to go in the letter.
ACTION Post Office to arrange a pre meet with JA around ahead of the MPs meeting
ACTION PY to look into the Kevan Jones case
Discussion then moved to Second Sight and their work. JA commented that he thought that both
JFSA and Second Sight were attempting to deal with issues without raising them to PV. Second Sight
though had raised some concerns with JA. In particular they had raised a concern about the
turnover of staff on the programme. PV disagreed on this issue pointing out that Angela VDB and a
team supporting her had been a member of the programme since the outset and that Belinda Crowe
had been working on this for several months.
JA then raised the issue of Second Sight’s employment and the draft Post office letter of
engagement. JA raised that he did not understand why Post Office were drafting a letter of
engagement when he had a letter from Jo Swinson (NB letter to Alan Bates dated XXXXXxX) that
made clear Post Office did not employ Second Sight. PV clarified that the letter made clear that
although Second Sight were not employed by Post Office they were engaged by Post Office in the
same way that any independent professional service might be and were accountable to the Working
Group. JA accepted this and it was also confirmed that JA did not engage Second Sight.
PV then talked through the process that Post Office was going through to investigate the cases and
the reports that Second Sight would be providing on each case. PV explained that as Second Sight
were now reviewing every case, their previous work for MPs and on Horizon had been subsumed
within their work on the Scheme which now needed to be their sole focus. JA raised the issue of a
final report, which PV thought could be provided at the end of the mediation as there was a need to
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avoid prejudging the mediation process. JA questioned whether this report could not be published
earlier and suggested that Second Sight could produce a report for the end of February. PV
explained that that would not be possible and that Second Sight needed to keep matters internal
while the mediation was ongoing but that there could be a report at the end. AP made the point
that it was not helpful to provide a running commentary and that there was a need now to focus on
delivering the Scheme. JA accepted these points.
Returning to the engagement letter JA commented that Second Sight were particularly exercised by
the clause limiting their ability to speak to MPs about the Scheme.
AP said that Post Office should have had a letter of engagement in place with Second Sight from the
start and that this was now putting that issue right. JA agreed that there should have been a letter
in place. PV suggested that if Second Sight’s nervousness was that Post Office was trying to restrict
therm from raising issues she could assure JA that that the engagement letter was not designed to
restrict in any way Second Sight’s ability to investigate issues with Horizon that were raised by
applications to the Scheme; she would consider with advice from Chris Aujard whether she could
write a letter to Second Sight providing assurance that they could always raise issues directly with
her and that they could continue to update JA on the progress of the Scheme and continue to raise
matters directly with James Arbuthnot in the same way as they had previously. JA commented that
he felt this would help, he then also raised the clauses restricting the areas that Second Sight could
provide comments on. in particular JA raised the restriction on commenting on Criminal
Convictions, Post Office’s prosecution policy and the legal liability that Post Office might have
towards any particular Subpostmaster.
PV commented that the priority had to be getting the cases through the Scheme and that Second
Sight needed to focus exclusively on that. PV also commented that Second Sight would not be
advising Post Office on Criminal Cases or their Prosecution Policy as they were forensic accountants
and not lawyers. PV reiterated that the only work that Second Sight were currently engaged by Post
Office to deliver was the work on the Scheme. AP pointed out that in terms of any spend by Post
Office they are a publicly funded organisation and the Post Office Board would wish to consider
whether any further work by Second Sight was good value for money given the amount of money
being spent on the scheme and the need to be able to assure external parties such as the NAO that
goad value for money was being obtained. PV offered that if a meeting with her would be helpful
then she was happy to do that. JA thought that would be helpful, particularly as Second Sight were
concerned that PV was not being briefed on issues.
ACTION Post Office to arrange a meeting between PV and Second Sight.
Discussion then moved to the Business Improvement Programme. PV talked JA through the changes
to the Post Office suspension policy and the change that had had on performance. JA commented
that this was a dramatic change. PV commented that the policy was more sensible and sensitive and
that it was coupled with increased training and support to Subpostmasters. PV also talked through
the changes to the termination policy including the new category of suspended termination, PV
explained that the business improvement programme had nine different workstreams and was run
as a separate programme from the mediation reporting into the network director.
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PV then raised Post office’s prosecution policy. First she clarified with JA that Post Office was not a
prosecuting authority and had not been sa since 1985. Since 1985 Post Office had been taking
forward private prosecutions on the same basis as any company or individual in England and Wales
can. The Post Office Board had not yet taken a view on what the final policy should be but they
were considering how (including looking at how retailers and banks prosecute) what the policy
shouid be moving forward particularly as Post Office expected the numbers prosecuted to decrease
ina similar way to the decrease in suspensions. JA commented that this would be a difficult
dilemma for Post Office to balance supporting their agents and protecting public money.
PV then updated JA on the work being done to develop the successor to the mediation scheme.
This work was currently at a very early stage but was important to Post Office for the future.
At the end of the meeting there was a short discussion of the length of Anthony Hooper's contract.
PV reassured JA that there was no intention to change the Chair of the Working Group and that the
contract length was just a function of the original expectation for the timetable to complete the
scheme.
David Oliver
07/02/2014
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[Fitename [6.3 PV meeting with Arbuthnot 28 Jan 2014(1).pdf LORIGINAL }
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Fram: Melanie Corfield {
Subject: FW: Post Office - prey
Duter Wed, 14 Qer 2015 11.26.48 +9000
Importance: Nonnal
Attachments: Post Office Mechation Schome meeting egcadedecx.
was just Jooking for eorething else and found this. Worth keeping arnangst ai} the QO stulf perhaps.
Mel
From: ARSUTHNOT, Jomes [james.arbuthnatap,
Sents 1? february 2094 L212
Subject: RE: Post Office - proposed meeting
Dear Colleague,
As promised, the meeting to update you an progress of the Post Office mediation scheme will now
take place on Monday 24 March, at §.45pm, in Room T in Porteullis Hause. [ attach an agenda
which we will fallow to give us the most use out of the hour available. I hope you will be able to
attend and would be grateful if you would let me know. If you can't, you are welcome to send @
representative fram your office, but again, I should be grateful if you would let me know.
T would like to mention a couple of matters in advance of the meeting, The meciiation schame is
running, and we must take care both to respect the privacy of individual applicants and to avoid
skewing the mediation process. individual cases will not be up for discussion, but I am sure that if
any colleague wanted to seek a separate meeting with Post Office ta discuss an individual case,
Post Office would be happy to arrange this separately,
I hope this is helpful, and look forward to seeing you en Manday 24 March,
Yours ever,
James
bHfice of the RY Hon Jamies Arisithnat, MP
RIGS
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{Filename "16:1 FW Pest Ofice moposed meeting’) mag [ORIGINAL]
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Madiatinn Scheme meeting
Manday 24 March, $/
Spr
Roars T~ Purtouilis House
3. Walesme and intrs ~ 5 mins
2. Update on progress with mediation scheme anc busines:
iS mins
3. Senoned Sight update - 16 eins.
4, JESS upriate ~ 16 ming
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Arbuthact MP
NAL
May. I too share your cornice:
poreciate that other
diate
an assure you we rernait
we have committed substan
adviser? to help the anpticants, any
and paying
Jickly a6 poscibie, which @ why
heme, including ba
programme
of the 137
Es sf
ve paces, and of these the Fost Gifica bas
ly underway.
ormation which is ragudred for the sexi
ady completed 22 investigations with ite
fact remains that every stage in the process is taking longer than orginally
nd Sight have arly just subi St Gage PeViEEN th
1@ which aise highlights the sub
Furthermore. my understanding is tha’
vmnplated
wert, ISSUES,
ress of theirs
tndged. the
ivan the stow 5
nore progres!
There ss one oth
you have caceived a of & SORE
is worth noteg that the Werldrg £
addressing the points 4
vhich I belie
ve Chair has felt that he gh:
F. {too have out
iQ the orpper operation
Working
arms of Reference. th nt of the letter disctases
nfidential to the Warking Group,
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nid paints a picture w
we Current and historic pesition. For example, the Post Off
siderabor at the
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#118.4
Metadata
Ut aa Co
TE 9 BV to Acbotnat 14 $2
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HOUSE OF COMMONS
20 May 2014
PT ECLY SHE
eee Pode. 5
is you for your fetter of 6 Mey. I appreciate all af what you ou say I altho gh Agnus to
he worried sbout the t
that case reviews are only the beginning of the inediation proces
by the fact that anly one review has bean completed thus far.
however, moan that you and I are going te have
estive members of our group are reassured
f> work hard te ensure tha
ughmut the process.
To this end, t wonder if you wig
an
'y, SO T am inclined te forgive him but the
westion f remains: why did he not fe i he could approach either Sir Anthony or you directly
is concerns? Do you know why this might be? 1 wonder whether it might be worth the
three of ug ~ you, ma, end Alan ~ meeting to dear the air?
Lhave written to him expressing my awn f bout his taking the tack he has and
sted at I would not want to see tt king Groug a: process phacudl in ary
jeopardy, but often 4 face-to-face me: is @ much better wey of sorting things out.
Let me know whet you thi
phar
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ORIGINAL I
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448 (Hd Gtrest
LONDON
ECAY SHO
Far the athention of Mrs $ Berlin
inal Case Rewew Commiiasi
% St Philip's Place
Barningham
3 SP
Oate 8? June 2004
Bear Mrs Bertin
Horizon Camputer System
{ refer to your email dated 16 May 2074 and confirm that. my predecessor, Crichton feft the
ness at the and of Octoker 2013. I apctogise for the fact that yau have not received an update on the
qress of the veviews onlerinkes by POL ond hape to nectify thal with the inforratien sat oud bela,
sivategy and process for rewewing
im renart to which Susan Crichton
referred it her jetter to you dated 26 July 2042,
As you woult expect, Mr Altman's review was thorugh, leading te a detailed repurt. and { arn pleased to
confirre that overall, his view was that the review (carried aut on behalf of POL by an external fire of
criminal specatist solicitors’) was fundamentally sound, and te did nat detect any aysternic or significant
flaws in the review process, or in the evidence arising from it. He did however highlight that because POL
has a continuing duty of disclosure, bath POL and the external firms of solicitors with vast experience of
rhanaging art poasexuting these ca remain prepared to keep under review, and reconsider. past
cage reviews and disclavare decisions,
Te give you sore detail, the process im re F cases (beth Crown Court and Magistrates’
geing hack te 1 January 2010 this being the earliest date on which Horizor Gnline was migrated
ints ait past wt branches sad is a tart date which Mr Akt GC considered to be fegical, prapertianate
and praciicable in light af the known circurastances), Essentially the scharne irenlved POLs solicitors
ilentifying every case within the above mentioned review period in which the primary or main widence
againat the defendant was based on Horan data, and inched also those cases involving suggested
problarns with Horizon training ar support, This was done by a rigerous sift review process, Once a
patentially affected case was identified, senior it “house prosecutors at the external firrn af soliciters carned
out a fill case review to determi : << POL been possessed of the material
contained within the Second Sight interiny report during the currency of any aarticular prosecution
should/aould POL have been required to disclose some ar all of that materia! to the de 2° fn cases in
which convictions had been obtained, this alas mesnt considering material for disclosure, which might cast
doubt on the safety of the conviction,
wars pastotfion c2.8k
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‘The process involved
cases, 4 full review of
rBees,
's external solicitara carrying outa sift of 308 case files, a second sift af 229
ases {in which disclosure vas advised in 26 cages}, and the discontinuance of &
ican confirm that since the publication of the Second Sight interim report on & July 2012, and despite
FOL's thorough review, POL has, te date, not received any application for permissian to appeal to the Court
of Appeal,
appreciate that the abave is a chart precis of a very extensive pracedure ann should you haye any further
questions/require any further clarification, please io not hesitate to contact me. =
For and on behall of
Post Office Limited
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448 Old Street
22 Jane 2014
PRIVATE AND CON!
Bear james
Thank you for your letter of 20 May. I appreciate that as we approach the surnrner recess MPs
would like an updata on progress of the Mediation Scheme and agree that it would be helpfui
for you te send one. However, I would like to consult with the Crair of the Working Group, who
go into such: an update. I do not think the
fidertial, would be suitable to release fer this
y's views fam sure we can werk with yaur office te develop ar:
», but subject to Sir Anthony:
update,
lates letter, this was discussed t the Working Greup and
rv wrate to the Minister << inaccuracies, JFSA have
continued te be an active participant in the Working Group and on that has’ not think that 2.
the air’ discussion is needed at this p but we wil of course keep this helpfil offer in
s the scheme progresses.
ii be in Louch again once i have discussed the proposed update with Sir Anthony.
chief Executive
wevewe. postofficg. co.uk
and Waring, Hepisteved the, 1754850. Register Gtiew 142 Cad Stoem, Landa ECIV SHAD
ss ate vesteured trade chavs of Pest Qh Lines
i
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£ paulavent
Further ic rey is
Maciation S¢
not be appre;
Annex A an
crvculat
dividual cases, but I aitach
Anthony, which cndd be
win, agreed by
nove through the process as guickiy as
nt approach, We would therefore be unat
the overview of the Scheme’s uray
te
Chief Exe:
senany gras tent Bigws com tk
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Annex &
Scheme Update {as provided by Sir Arthany Hooper. Chair of the Initial Complaints Review and
Mediation Schemel
n total, 150 applications have been made te the Scheme. OF thage. 4 were re}
«The Working
advict
ta arrange:
iunately been defays in ‘agrass af the Scheme, & has taken fonger than I
anticipated to retrieve the rdormation required to investigate the cages. i
+ addition,
anticipated
Savond 5:
nad Lo give soplicants more opportunity than
clarify th estiontaire Sesponses and te coriment upon:
reports. This hag the advantage that 3 case reaches the med!
seul from applicants,
ily
‘ast Oifice and
ony stage it should
rie and tries to enate as 3
aek the Working Group discusses the pragress of th
areschition a5 posaible,
nedly
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sheenemnnennnsnrenstne «
ton. Phe Bt. How. James Acbathaor MUP
Paula Varnes
Chief Executive }
RS aor Pork
Thank you far your letter of 2 July 2114, which reachas my office this marning.
i uaduestare your reticence about
Annex to your letter, 1 will circulate t
that no further ne be offered.
poding anytting further lo MPs then is qawered by the
9 the group who will, I suspect, be disappointed
What I propose Ic write to thern via email is as follows:
whieh the Fost Office
ffer us an update on how the mediation scheme is progressing. Te this end I heave
bean in corraspondance with Paul Venredis, the Chief Ea ve. Lattach an undate fram ner
office, which I have fist received.
i aaperrs that not a great deal be acideri tu what was seid in our last mmseting. 1 see no i
nt in trying te push for a nieeting which offers no further detail than we heard at the fast.
Tusdesstand anc ar conesrnert thet the investigations and raviews ars taking longer thag
afiy Of oS anticipated. 2 is possible (though I hawae nel buen tal] eo} that the Post
considers thal nothing can he seid aout any individual case until something can be sak)
about all of them. Parhans there is a risk in the mind « arthony Hooper that te release:
tins result of one Case might crgete pressuns on arether,
(intend to press the Past Office or this point, to reconfirm the need te giv ail some
substantial information, and to came back to you with e further eprdate in September,
(nape you right Ge content with this approach.“
1 plan oy sending this at the end of this week. If you: wnuld like to suggest any
amendments, could you dis so by ci play Thursday 10 July please?
Lohogboaes,
[Plenaie
8. SF Adbsatince PY B 7 20187),
#2104
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From: “Melanie Corfickd”
2 “Rath X Barker.
“Niga Arnott”
Subject FYI - larsce Aybathodt note
Date: Tha, 17 Jal 2094 14:13:53 400
finportance: Normal
Attachments: Post QDice_aote, Ady 2014 pdt
Bia there
from JA yesterday
flure’s the note (below and sith Paw! 3} Hat weet cut to relovard MMs
2 dig and P will cimoulats ater
svebiok Helieds bas
sant upstatee
wk box scase
From: ARGUTHNOT, James [mailto ines:
Sent: 16 July 2014 12g
Subject: Post Office - proposed July mesting
Bear Colleague
i bad hoped that we might schedule a meeting before summer during which the Past Office might
offer us an update on how the mediation scheme is progressing. Te this end t have been in
correspondence with Paula Yennelis, the Chief Executive, to see what might be arranged.
It appears that not a great deal can be added to what was said in our last meeting, The mediation
scheme is progressing, but at a slower pace than any of us would have liked. Rather than hold a
meeting just before Recess that will not reveal more than we already know, I would rather wait
untif auturan, but Ide want to get a date in the diary for a meeting then.
L attach a note that Paula has sent which sets out the progress made since our last meeting. She
has reiterated to me that the integrity of the mediation scheme requires that canfidentiality of
cases be respected. In a letter to me she has also said that individual case details may not be
shared with us at any point, including at the end of the Scheme.
I would like to believe that at the end of the Scheme we will be presented with a report which
shows why and how we got to the stage where so many individuais were (and still are) coming
forward with their concerns and their often: harrowing stories, I do beliave that the mediation
scheme has a good chance of righting things, but we shall all need clarity as to what happened
and why, and how it is being put right.
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Yours ever,
James
Siting of the Ri Hen Jarnes Aruitriot, MP
Haose of Comunang
dan SW1A DAA
Webaite. gra, anesariudinet nan
UK Parliament Disclaimer: This e-mail is confidential to te intended revipient. H you have received it in
error, plonse actify the sender and delete it from your systers. Anv unauthorised use, disclosure, of copying
is nen permitted, This eanail fas heen checked for viruses, but ne hability as acvepted for ary damage caused
by any vires transmitted by tds e-roail,
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eis WS
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Anta. &
Reheme Update (ae prow
Mediation Scheme}
mat by Sir Anthony Houper, Chair of the initiat Complaints Review and
dan saakinh
Haris Taca net
ef BG mweatigacs
* Wy HARI OS Gwalling 29 Case O: Spe tee
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25 July 2014
Initial Complaint Review and Mediation Scheme
BRIEFING REPORT - PART ONE
PREPARED BY
SECOND SIGHT
This Report and accompanying documents are confidential and are not to be
disclosed to any person other than a person involved in the processing of
Applicants’ claims through the Scheme
Part Two of this report will be provided where necessary to the processing of
an Applicant's claim
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Introduction
1.1. This report describes some aspects of Post Office branch operating procedures and related
functions of the Horizon system. The report has been prepared by Second Sight, which is the
trading name of Second Sight Support Services Limited, the company appointed to conduct an
independent investigation of a number of matters raised by Subpostmasters, or former
Subpostmasters.
1.2. Horizon is the electronic point of sale system, which together with associated back office
functions is used across all Post Office branches to pracess and record a wide range of
transaction types. The term “Horizon is used throughout this report to refer to both the
original Horizon system, which dates back to 1995, and the current version of Horizon,
introduced in 2010, known as Horizon On Line. Where important, the differences between the
two versions are explained. The Horizon system, including the main technical aspects of the
two versions, is described in more detail later in this report.
1,3.A Glossary of Terms has been provided by Post Office and is attached at Appendix 1. Examples -
2
to demonstrate how an individual transaction or pracess operates have been included where
relevant.
Structure of this document
2.1. This document comprises seven major sections providing:
3.4
© General information about Post Office, its branches and the role of Subpostmasters;
* Adescription of the training and support functions as well as the Post Office audit and
investigation processes;
@ Anoverview of the Horizon system and associated equipment;
* Anintroduction to the application of double entry accounting in Horizon;
* Adescription of significant branch operating and reporting procedures and the associated
processing of transactions;
© An outline of the treatment of losses and surpluses; and
* Ananalysis of typical errors,
Post Office Branches and Subpostmasters
The Post Office was part of the Royal Mail Group until the two businesses separated in April
2012. The majority of its income is self-generated, but it does receive financial support from its
ultimate shareholder, the UK government.
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3.2.
3.3.
3.4,
3.5.
3.6.
3.7.
3.8.
3.9.
3.10.
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including staff in Crown branches (see below}, Post Office directly employs almost 8,000 people,
in support of the Post Office network. These management and support roles include central
staff as well as field-based saies, development, training , audit and security teams.
In addition there are approximately 6,000 Subpostmasters, who are the main focus of this
report, and employees of "Multiples" (see 3.32}.
Post Office’s network of around 11,500 branches provides a range of approximately 170
products and services, as described by Post Office. This is set out in Appendix 2, including
banking and access to government benefits. Some of the consequences of providing such a
wide range of services are considered in Part Two of this report.
Subpostmasters
The majority of Post Office branches are run by independent Subpostmasters and are known as
“Agency” branches. Subpostmasters are, in the main, individuals who are contracted to run
Post Office branches. They operate as individual contractors rather than as employees of Post
Office and their position can be considered as being similar to that of a franchisee.
Before appointment as a Subpostmaster, the applicant is vetted by Post Office for suitability
and is appointed under the terms of a standard contract {see 3.13 onwards for more details).
Prior to 2001 Post Office sometimes charged a new Subpostmaster a fee in recognition of the
benefit arising from being granted the opportunity to run a Post Office branch. This fee took
the form of a 25% abatement of the Subpostmaster’s remuneration for the first year following
appointment, but we are advised that such charges have now ceased.
Should a Subpostmaster either resign or serve notice to terminate their contract for services
then Post Office will normally seek to appoint a replacement Subpostmaster to the branch. If
there is no transfer of premises or retail business as part of the replacement appointment
process, as described below, then Post Office may levy an introductory payment on the new
Subpostmaster. Although this charge is not made in all cases it would be made as an upfront
charge at the start of the new Subpostmaster's contract for an amount equivalent to 25% (plus
VAT) of the gross remuneration for the branch in question.
As noted above, it is possible that as part of the appointment of a new Subpostmaster to an
existing branch, there could also be a transfer of premises and/or ancillary retail business from
the old to the new Subpostmaster. In such cases there would normally be an additional
financial agreement, effectively equivalent to a payment for goodwill, between the parties.
Temporary Subpostmasters
In the event of a Subpostmaster being either suspended, or his/her contract being
terminated, a Temporary Subpostmaster may be appointed to take over the running of a
branch.
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3.11. Temporary Subpostmasters operate the branch and receive remuneration from Post Office
under the same contract terms as Permanent Subpostmasters, except that their notice period is
one week rather than three months. The terms under which a Temporary Subpostmaster will
operate from an incumbent Subpostmaster's premises will be agreed between the parties.
Typically, this involves the Temporary Subpostmaster paying a weekly or monthly “rent” to the
incumbent Subpostmaster.
3.12. Post Office keeps a list of pre-approved Temporary Subpostmasters who can be called upon
at short notice to take over the running of a branch in order to allow continuity of service.
Subpostmaster’s contract
3.13. The majority of Subpostmasters currently provide services to Post Office under the terms of
a standard contract. Although subject to several revisions over the years, it is understood that
the core principles of the contract have generally remained unchanged since 1994.
3.14. Relevant sections of the standard contract are commented on in Part Two of this report and
a copy of the whole contract is available on request.
3.15. Under the terms of the contract, Subpostmasters are remunerated based on a combination
of fixed and variable amounts calculated according to the volume of business that they transact.
3.16, in terms of carrying out Post Office business, the Subpostmaster is an agent of Post Office.
In tegal terms, Post Office business is a transaction between the customer and Post Office
Limited, with the Subpostmaster acting as Post Office's agent to complete the transaction.
3.17, As the Subpostmaster is not undertaking business in his own name, the cash and stock held
at a branch is owned by Post Office and, in effect, the Subpostmaster acts as a steward of these
assets, Subpostmasters are "responsible for all losses caused through their own their
negligence, carelessness or error” (contract clause 12(12}). Subpostmasters are additionally
“required to make good any deficiency, of cash or stock, which may resuit from his assistant's
actions" (contract clause 15(2)).
3.18. if cash or stock is lost due to the fault of the Subpostmaster, the Subpostmaster is obliged to
reimburse Post Office for that joss. The contract alsa provides that ‘surpluses may be
withdrawn provided that any subsequent chorge up to the amount withdrawn is mode good
immediately’ (contract clause 12(14)). The treatment of losses and surpluses is dealt with more
fully in section 9 of this report.
3.19. Errors by Subpostmasters can sometimes result in a Subpostmaster’s contract being
suspended and/or terminated, and/or action being taken to recover any related loss. An
evaluation of the significance and seriousness of any such errors and losses, together with any
associated action, is determined by Post Office usually after an Audit of the branch has been
carried out by Post Office staff (see 4.32 onwards for more detail on the nature of a Post Office
Audit).
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3.20. Where Post Office suspects criminal wrongdoing by Subpostmasters or their staff {as well as
staff at Crown offices) then it may exercise a general common law right (only available in
England and Wales) to pursue a private prosecution. Alternatively it may refer the matter to
National prosecution authorities, as is required in Scotland (the Procurator Fiscal) and Ireland.
More serious cases such as armed robbery are referred directly to the police for action.
3.21. Typical criminal prosecutions are for theft or fraud, including false accounting (the latter
where a Subpostmaster has declared transactions or stock and cash levels within the branch
which the Subpostmaster knows are not true).
3.22, Post office states that prior to any private prosecution being pursued the circumstances will
be investigated by the Post Office Security Team. This information is then reviewed by Post
Office lawyers to determine whether the case is suitable for prosecution.
3.23. Once a prosecution is underway and potentially proceeding to trial the case is kept under
review and should circumstances change Post Office can decide to stop the prosecution by
“offering no evidence".
3.24. if a defendant is convicted, either by their own guilty plea, which could follow plea
negotiations, or following a trial then the Court may order the person to pay Post Office's legal
and investigation costs and also possibly compensation. In some cases Post Office may seek a
Confiscation Order against a convicted defendant to obtain compensation for losses suffered.
3.25. _ In addition to criminal prosecutions Post Office may use the civil recovery process to recover
sums claimed to be due from Subpostmasters. This process is not normally used where a
Subpostmaster is in post as agreement can often be reached to deduct any amounts due from
remuneration or by way of instalments. If the civil recovery process is pursued then this will
typically follow three, escalating stages (i.e. direct communication, involvement of external
Jawyers and legal proceedings} during which further investigations of issues raised can be made,
possibly resulting in an amendment of amounts claimed as being due.
3.26. Although retaining full contractual responsibility a Subpostmaster does not need to be
Personally involved in the running of a branch and may employ assistants to conduct branch
business but is not required to notify Post Office of the arrangement. In some cases, a
Subpostmaster may employ a Manager to run the branch and may have only minimal personal
involvement in the provision of contractual services and day-to-day operations.
3.27. Each Subpostmaster typically owns (or leases from a third party landlord) the premises from
which the branch is run. Other than Post Office setting minimum standards for the premises
(in terms of legal ownership rights, physical security, etc.) it is the Subpostmaster’s
responsibility to provide and operate the branch premises.
3.28. The premises may often be part of an existing business such as a convenience store, typically
referred to as the "retail business". Part of the premises may be used for transacting Post
Office business and the Post Office equipment, cash and stock is generally kept away from the
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retail business although the new “local model”, which is being introduced as part of the
Network Transformation Programme (see 3.33 and 3.34), is changing this position.
Branch types
3.29. Although the focus of this review relates principally to the operation of “Agency” branches,
there are other types of branches within the Post Office network, which are staffed in a
different manner. These include “Crown” branches and “Multiples” as described in 3.32.
Crown
3,30. There are around 350 Crown branches that are directly owned and run by Post Office. The
staff at Crown branches are employees of Post Office Limited and each branch is run by an
employed “branch manager” rather than a Subpostmaster,
3.31. Staff and managers of Crown branches are employees of Post Office and, unlike
Subpostmasters, are not liable for losses as these are directly absorbed by Post Office, The
operating procedures at Crown branches are however largely the same as those at Agency
branches, including the operation of the Horizon system.
Multipies
3,32. Branches are sometimes located in premises operated by larger businesses, for example,
Cooperative convenience stores or WH Smiths. These larger businesses tend to have multiple
branches and are therefore called “Multiples”. The operating procedures at Multiples are
however also largely the same as those at Agency branches.
‘The Network Transformation Programme
3.33. The Network Transformation Programme (NT Programme) that is currently underway, is
seeking to change the way that Post Office services are offered in branches with particular
reference to the hours during which Post Office services and products can be provided.
3.34. Under the NT Programme, Agency branches are being transferred to either a “Main Branch”
model in which a dedicated Post Office counter, physically separated from the Subpostmaster’s
own retail business, will be maintained, or a “Local Branch” model which fully integrates Post
Office services within the retail business. This will allow Post Office services to be offered for
longer hours than before, and may help to resolve some of the issues about hours of opening,
end of day cut off procedures and the need to keep separate records where Post Office
products are sold from the retail business, for example National Lottery products.
The National Federation of Subpostmasters (the NFSP)
3.35, The NFSP is an independent organisation representing Subpostmasters in their dealings with
Post Office. Although not all Subpostmasters are members of the NFSP, it is the only
organisation recognised by Post Office to negotiate rates of compensation for branch services
on behalf of Subpostmasters nationwide. The NFSP works very closely with Post Office on a
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range of issues including security, operational systems and technology and its 24-hour helpline
provides advice on staff, contract and other issues, except for those relating to Horizon.
The Justice For Subpostmasters Alliance (the JFSA)
3.36. The JFSA has been instrumental in setting up the Complaint Review and Mediation Scheme
and is represented in the Working Group. Its role is to ensure that the process addresses
significant issues that have been raised by Applicants and moves them towards resolution.
4. Training, Support and Auditing
4.1. This section summarises the various training, advice and support functions provided to
Subpostmasters and how these have evolved over the years. An overview of the Post Office
audit and investigation function is also provided.
NBSC
4.2. The Network Business Support Centre (NBSC) was established in December 1999 to provide
phone-based support to Subpostmasters and their staff. The hours during which this support is
available has changed over time.
4.3. The NBSC's mission is primarily to provide assistance to Subpostmasters with problems arising
from the processing of transactions carried out through Horizon, as well as how to deal with
mistakes and issues arising out of the monthly branch trading statement (see 8.8 and 8.9).
4.4, New NBSC staff themselves receive a four-week training course and ongoing training on new
products and services as they are introduced. Observations on the quality of support and
product knowledge are included in Part Two of this report.
4.5, Post Office currently employs the equivalent of 70 people within the NBSC to receive calls,
undertake second line support as required and carry out administrative roles, although the
number of staff actually on duty at any one time to receive calls will vary. The NBSC receives
On average approximately 1,700 calls a day. Potential peaks of call volumes to the NBSC have
been "smoothed" by spreading branches across four trading groups, such that required monthly
submissions from branches, with associated queries to the NBSC, do not all fall on the same
Wednesday evening in each month.
4.6. The NBSC operates a two-tier escalation process so that if the NBSC advisor is unable to initially
resolve the query/issue with the caller, the call is escalated to Tier 2 where more expert advice
can be provided. If this still does not resolve the issue, the Branch Support Team will decide if
further training or face to face branch support, which is outside of the NSBC’s remit, is required.
4,7. We have been advised by Post Office that the performance of the NBSC staff is measured on
‘the time advisors take to answer the phone, referred to as a “Grade of Service", and we are
advised that the target is to answer 70% of calls within 30 seconds and to have no more than
5% of abandoned calls (i.e. where the caller hangs up before reaching an advisor), We are
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also informed that additional measures, including surveys of "Subpostmaster Engagement
Support Satisfaction", have recently been introduced.
4.8. We also understand that, in the event of a complaint about a specific issue, the NBSC’s target is
to resolve 95% of such complaints within 10 working days.
4,9. The use of these metrics to evaluate performance and any conclusions relating to the quality of
advice and support received from the NBSC and the Horizon Service Desk is dealt with more
fully in Part Two of this report.
Horizon Service Desk (HSB)
4,10. In addition to the NBSC, Subpostmasters can access Horizon On-Line Help and may contact
the Horizon Service Desk (HSD), which is operated by Fujitsu. os
4.11, The HSD deals with technical issues concerning Horizon and in the event that a technical
issue cannot be resolved in a telephone call the HSD can arrange for an engineer to attend the
branch to investigate the issue further.
4.12, Anumber of calls by Subpostmasters for support are apparently made to the wrong helpline
and have to be redirected. We have been advised by Post Office that approximately six
percent of calls received by HSD do not relate to technical issues and are transferred to NBSC,
whereas approximately two percent of calls received by NBSC relate to technical issues and are
redirected to HSD. We return to this issue and comment on possible reasons for this lack of
understanding by Subpostmasters in Part Two of this report.
Field Support
4.13. Post Office has a dedicated Field Support Team responsible for induction and on-going os
transactional training for all Subpostmasters. Although the structure of the team has changed
over the years, it currently consists of 227 Field Support Advisors (FSAs) who, together with 18
Field Team Leaders (FTLs), provide training and support to branches. in addition, they deal with
Subpostmaster queries and carry out Audits ~ see below for further information and comment
‘on Audits.
4,14, The Post Office network of branches and Subpostmasters is currently managed as three
distinct groups. The first two of these groups, "The Top 2000" and "The Next 2000", are
individually managed with an apparent focus on sales potential and performance, rather than
providing operational support, although non-sales issues are addressed as required.
4.15. The third group are classed as “Branch Support”. They are not pro-actively visited and do
not have a Post Office employed manager assigned to them, resulting in their first point of
contact and support being the NBSC. There are a number of escalation points depending on
the nature of the issue and, ultimately, if the Subpostmaster experiences a problem that cannot
be resolved aver the telephone, a visit by a Field Support Advisor can be arranged.
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4.16, As noted above, the Field Support Team is responsible for matters such as:
© Delivering classroom training to all new Subpostmasters and those who are going
through the NT Programme.
* Training on site following a branch transfer.
® Requests from branches for additional or remedial training by FSAs. NB The
Subpostmaster will normally receive the training and is then responsible for training his
or her own staff.
® Undertaking Compliance and Financial Audits, which can also include providing further
training to Subpostmasters on matters identified by such Audits. More than 3,000
Compliance and Financial Audits were undertaken in 2013 in addition to 2,873 Cash
Count and Stock Check Audits.
4,17. in addition to the Field Support Team, there are others within Post Office who provide
training and support, either on a face to face basis or remotely by telephone. These include
Mail Development Managers (for branches which receive a high volume of mail) and the Branch
Standards Team.
4.18. The Branch Standards Team was established in 2009 as a telephone-based intervention
team. The team regularly contacts branches regarding a wide range of performance issues and
errors, ensuring that the branch is aware of the correct operational procedures to follow.
4.19. There are a number of other teams across Post Office who may also come into contact with
Subpastmasters (such as product specific teams, for example the National Lottery team) and
who may, in some cases, recommend additional training. The Subpostmaster can also request
further visits and training from the Field Support Team.
Training
4.20. Post Office will typically provide new Subpostmasters with training both prior to and after
taking up their position in branch, Training can cover matters such as how to transact products
and services; reconcile the day's transactions; “remming” in and out cash and stock {see below);
and despatching cheques to processing centres.
4.21. Subpostmasters are also advised on how to balance the branch on a weekly basis, roll over
into the next weekly balancing period and how to balance at the end of the monthly “trading
period”. As part of this training, Subpostmasters are shown how to verify transactions and the
cash and stock on hand if discrepancies arise; how to accept or to challenge Transaction
Corrections (see 7.30 onwards); how to make good any losses and gains; and how to raise
issues about errors/discrepancies.
4.22. As set out below the nature of this training has evolved over time and a summary of the type
of training that has been provided by Post Office in the past is set out below. in addition to on-
going training related to operational processes, specific training was provided as part of the
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introduction and implementation of the original Horizon system and then the migration to
Horizon On Line.
2001 ~ 2002
4.23. Classroom training was offered to new Subpostmasters followed by ten or eleven days of
onsite training and support. This would be followed by one day of follow-up support on how to
carry out balancing at the end of the trading period, referred to as “balance support”.
2003 - 2005
4,24, Between five and ten days of classroom training was offered to new Subpostmasters (the
training being aptional) and five to ten days of onsite training and support was then given
depending on whether the classroom training was attended. This would be followed by a
further day of follow-up balance support.
2007 ~ 2011
4.25. New Subpostmasters received five, eight or ten days of training on foundation, sales and
other specialised modules. Six days of onsite training and support was provided, again
followed by one day of follow-up balance support. in 2007, after a pilot scheme, follow-up
telephone cails were introduced at intervals of one month and six months after a branch was
taken over by a new Subpostmaster, with a one-day site visit taking place three months after
the branch was taken over.
4.26. A Subpostmaster may choose not to attend training, or only attend part of a training session
if, for example, he or she has worked in a branch previously and therefore already knows how
to operate Horizon and carry out transactions. Once initial training has been provided, it is the
responsibility of the Subpostmaster to train his or her staff and ensure that updates or new
procedures are followed and communicated to their staff. Equally, it is for the Subpostmaster
to ask for further training and/or assistance if it is required.
4,27. {n 2012, as part of the wider steps being taken to “transform” the network, Post Office
tailored its training to refiect the specific role being undertaken and rolled out further training
depending on, for example, the experience of the Subpostmaster, the type af contract they
would be operating and the number of employees they have.
4.28, The precise training given to a Subpostmaster therefore depends on a number of factors
such as whether the Subpostmaster is completely new to the role, whether he/she is taking
over an existing branch with existing staff, the size of the branch, the branch operating model
(ie. Main or Local) and the types of products and services to be transacted.
4.29. Post Office’s approach to structuring its relationships with Subpostmasters has evolved over
time,
4.30, Branch classifications, roles and titles have changed with Retail Line Managers and
Performance Advisors becoming Sales Managers and Area Performance Managers, who by
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2008/9 were replaced by Commercial or Community Business Development Managers. The
Business Development Manager role has itself now been replaced by an Area Sales Manager
function.
4,31, _ Also, in 2008/9, the transactional training teams, previously functionally part of Post Office's
HR department, were renamed as Network Field Support Advisors and the Financial Audit Team
was merged with the Network Field Support Advisor team. As a result, Field Support Advisors
now conduct both training and Audits in branches.
Auditing
4,32. in order to monitor and validate performance, Post Office will often conduct Audits of
branches, This allows Post Office to assure and verify its assets, which are held in branches and
to ensure compliance with regulatory and business requirements. The Post Office term “Audit”
as referred to in this Report is mainly used to describe a cash and stock count carried out solely
by Post Office, which may be supplemented by a Compliance Audit. In the event of a material
shortfall arising during an Audit, it is common practice for any Compliance Audit to be deferred.
4.33. A Subpostmaster with concerns relating to the results of a Post Office Audit may only use
the services of an independent auditor in order to verify the results if that auditor is given
access to the branch's secure area and to Horizon as a registered user. However that person
would only have access to the same data as that available to the Subpostmaster. Furthermore if
the Subpostmaster had been suspended they would not then be able to register that person
and give them access to Horizon or the branch's secure area.
4.34. Audits will normally take piace:
© When a risk at a branch has been identified (e.g. the branch is continually suffering
shortfalls);
* On the appointment of a new Subpostmaster;
» On the transfer of the branch to a new Subpostmaster (a further audit will often take
place between six and nine months after the date of transfer}; or
* Following a robbery or burglary (in support of loss mitigation).
4.35. As it is not possible for Post Office to visit and carry out an Audit at every branch each year,
it also undertakes Audits whereby branches are selected at random to be audited. As well as
the normal cash and stock verification and evaluation of adherence to Post Office’s systems and
practices this approach also assists with the risk profiling of branches.
4.36. The precise nature of the Audit will depend on the reason for the audit being undertaken,
but will normally be restricted to a simple count of cash and stock. As such, it has only limited
value in investigating and understanding underlying causes of errors and losses.
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Within this context audits will usually include checks such as:
¢ For branches with paystations or lottery terminals, ensuring any overnight Transaction
Acknowledgements (see below) have been properly accepted;
e Checking the cash declaration for the previous trading day;
* Counting and recording the amount of stock and the cheques held in the branch against
the record maintained on Horizon; and
© Verifying any foreign currency held in branch.
4.37. As noted above this may sometimes be supplemented by a Compliance Audit to ensure that
regulatory and business requirements are being followed. If compliance issues are identified
this may then be followed up by the Branch Standards Team who will assist the Subpostmaster
in rectifying the compliance issues. if an issue cannot be rectified by the Branch Standards
Team, the Team can arrange for a Field Advisor to visit the branch and/or for further training to
be provided.
4.38. The results of the Audit shoufd normally be discussed with the Subpostmaster. In the event
of a shortage being identified, an audit may result in the Subpostmaster being asked to “make
good” the loss (i.e. to reimburse the loss to Post Office from the Subpostmaster’s own funds).
It may also result in a Subpostmaster receiving what is termed a “precautionary suspension”, of
both contract and remuneration. Further details of the treatment of shortages in other
circumstances and how they arise and can be addressed are set out in section of this report.
5. Horizon and associated equipment
5.1, As an understanding of the operation of the Horizon system is fundamental to an appreciation
of many of the issues raised in the Complaint Review and Mediation scheme this section
provides a broad description of how Horizon (both the original version as well as the amended
version, known as "Horizon Online" or "HOL") is structured and operates, as well as giving
information retating to other equipment used in Post Office branches, including Automated
Teller Machines (ATMs).
5.2. Horizon is the electronic point of sale IT system used across alt 11,500 Post Office branches to
undertake transactions (from selling stamps to cash withdrawais and currency exchanges).
Horizon supports approximately 30,000 terminals in branches , with 68,000 users having access
to the system. In 1995, Post Office commissioned the development of the original system from
the company now known as Fujitsu Services Limited and we are advised by Post Office that the
system has been accredited in accordance with the Payment Card Industry Data Security
Standard.
5.3. The whole, bespoke, system comprises the following elements:
» Computer hardware and communication equipment which Is installed in each branch
including touch screens, counter terminals and printers;
® Central Data Centres where transaction data from every branch is stored;
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* Control and monitoring systems; and
© Testing and training.
5.4, The following brief description reflects the way in which the current version of Horizon, known
5.5.
5.6.
5.7.
5.8,
5.9,
as “Horizon On fine" or "HOL" operates. This was rolled out by Post Office in 2010 as part of its
Horizon Next Generation (often referred to as "HNG-X") Programme to provide a simplified
network based on the centralised processing of data. The main changes, compared to the
earlier Horizon system, principally affected the way in which each terminal communicates
transaction data to the central Post Office Data Centres and did not significantly impact on the
actual use of the system in each branch.
Prior to the introduction of Horizon On Line, the data relating to each customer transaction was
processed and stored by a designated master terminal in each branch before being transmitted,
in batches, to a central Post Office Data Centre. In the event of power or equipment failure at
a branch this could mean that transactions could be lost and would be subject to a recovery
procedure. Under Horizon On Line, each branch terminal now communicates directly with a
Post Office Data Centre on a transaction by transaction basis, which should reduce the potential
for transactions to be lost. This is explained more fully in the following section on
“Connectivity”.
In order to function, Horizon must be “online” and each terminal connected to a Post Office
Data Centre via a secure communication line with a back-up system, provided by Post Office,
normatly comprising a mobile phone connection. The Subpostmaster is responsible for the
provision of and payment for the communication line itself.
Transactions in Horizon can only be physically entered by someone with a user ID and an
associated password. Formal approval of a new user can only be carried out by Post Office but
new users can be added to the system and allocated a User ID by a Subpostmaster or other
person once that person has been set up with "manager access” by a Field Support Advisor .
‘Once a User ID has been allocated then the required associated password can be set either by
Post Office or by the Subpostmaster before being subsequently managed and changed by the
approved user.
Individual transactions are conducted through a series of "conversations", each of which has a
unique sequential serial number. Horizon records all data centrally in the Branch Database in
the Post Office Data Centre and a copy of all transactions is also made to a separate audit server
at Fujitsu where they are stored independently. Post Office has advised that a limited number
of security personne! at Fujitsu have read-only access to this audit server.
Post Office has additionally confirmed that it is their understanding that it is not, and never has
been, possible for anyone to access Branch Data and amend live transactional or stock data
without the knowledge of the Subpostmaster or their staff.
Financial data is stored by Fujitsu for a period of seven years, in ine with Post Office data
retention policies, after which it is destroyed. This time limit as well as the available financial
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budget to process requests for information has, in some instances, posed serious barriers to
subsequent investigations.
5.10. _Inorder to ensure the integrity of the data held in and processed by Horizon the system
operates a number of integrity checks. Examples of such checks include the following:
* Data passing from Horizon to third parties or to Post Office’s “back office” are driven
from one source to ensure that every recipient receives the same data,
* Financial transactions such as banking withdrawals and card payments are automatically
matched against the view of the transaction held by the customer's bank {i.e. if £100
has been withdrawn at a branch, this will be recorded in Horizon and will be
subsequently matched against the bank’s record that £100 has been withdrawn). {f -
discrepancies arise they will be addressed following Post Office's procedures as
described below.
Connectivity nes
5.11. Each Horizon terminal requires a direct connection, provided and paid for by the
Subpostmaster, to a Post Office Data Centre in order to process transactions and this Post
Office Data Centre in turn communicates with third parties (such as banks, the Royal Mail, DVLA
and local authorities) in order to complete transactions,
5.12. The communications equipment in each branch needs to be connected to both a power
supply and a communication channeft in order to operate and process transactions.
Connectivity issues can arise and may cause operating difficulties and errors. For example,
when there is an interruption in the power supply or a breakdown in the communications line.
5.13. All Horizon transactions are conducted over a secure virtual private network between the
terminal in the branch and the systems within Post Office Data Centres, which allows private
data to be shared securely across the internet.
5.14. When serving a customer, transactions for some products can be completed within Horizon
and immediately send information directly to Data Centres during the transaction, whereas
some do not interact with the Data Centres until the customer transaction has been completed.
5.15. If there is an interruption to the power supply, there is a possibility that transactions may
not have been fully and properly captured at the Data Centre,
Horizon will normally check to determine whether there are any incomplete transactions
following an interruption and if possible will try to remedy the lack of data.
5.16. The user will be prompted, once the system is reconnected and the user is logged back on,
with a message containing instructions on how to recover the interrupted transaction. This .
message should confirm whether the customer's transaction was completed and whether any
payment needs to be received or made.
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5.17. The steps which need to be taken (as directed by Horizon) will depend on the type of
transaction being processed during the power or equipment failure (see 5.14).
5.18. Similarly, if there is an interruption to the communication channel and/or a failure to
automatically connect to the mobile phone backup device provided by Post Office during a
customer transaction, Horizon is designed to prompt the user with on-screen messages
explaining what to do and whether to cancel or retry the transaction.
5.19. If the Horizon messages are not clear or are not clearly displayed for sufficient time, and the
user does not follow the recovery instructions correctly, this can result in a failure to process all
or part of the customer's transaction and later resuit in a balancing error.
5.20. We have been advised that Fujitsu (see above} has a process by which it proactively
monitors the primary and back-up connectivity between branches and Data Centres and, If
alerted to a connectivity issue, will normally investigate and try to resolve the issue as soon as it
is detected.
5.21, There is alsoa risk of hardware failure, but this should also be visible to Fujitsu and
depending upon the nature of the fault may in some cases require branch equipment
replacement (see Branch Error Analysis section below}, referred to as “swap outs”.
Associated equipment
5.22. Within a Post Office branch there may be various pieces of equipment used to conduct
specific transactions. A description of the main items and the main operational requirements is
set out below.
Automated Teller Machines (ATMs)
5.23. In 2005, Post Office awarded a contract to Bank of ireland to provide ATMs in its branches.
Bank of ireland is a member of LINK (the UK network of ATM providers}. it provides and installs
the ATMs in Post Office branches, delivers training and offers technical and maintenance
support. Itis also responsible for the settlement process (between Post Office and each
customer's bank account) and handles customer queries about ATM transactions.
5.24, In support of the operation of ATMs installed in branches, Post Office provides cash (notes
which the ATM dispenses), while cash-loading, basic first tine maintenance and associated
accounting are handled within each branch.
5.25. On installation of an ATM, operational training is provided by Wincor, a sub-contractor to
Bank of ireland. When responsibility for a Post Office branch, which already has an ATM,
transfers to a new Subpostmaster, ATM training is provided by Post Office as part of its
standard training package.
5.26. Each branch is also provided with a Bank of Ireland ATM Operator Manual on how to use the
ATM, which includes descriptions of how to load cash into the ATM, how to obtain the ATM
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cash dispensed "totals receipts” and how to use the ATM's Cash Management menu. Each
branch is also provided with "Accounting Instructions for Bank of Ireland ATMs" which explains
how activity on an ATM should subsequently be recorded in Horizon by the Subpostmaster.
5.27. Each day, the Subpostmaster must print from the ATM a “totals receipt” that provides the
number and value of withdrawal transactions and retracted cash transactions (where a
customer forgets to take their cash and it retracts back into the ATM). The data from this
receipt must be manually input into Horizon by the Subpostmaster or branch staff. In the rare
circumstance of a retracted transaction, the retracted cash must be physically removed from
the ATM by the Subpostmaster, counted, and the amount also recorded in Horizon so that the
customer's account can be re-credited.
5.28. Once a week, the Subpostmaster should remove and count all the cash in the ATM and
manually record this figure in Horizon (in addition to recording the totals shown on the ATM.
receipt as described in 5.27).
5.29, Part Two of this report comments in more detail on some of the operational aspects relating
to ATMs.
PayStation
5.30. A PayStation is a standalone payment device that allows branch staff, on behalf of
customers, to carry out certain bill payments, £-Top ups, as well as make electricity key and
Quantum gas card top ups.
5.31. _ PayStation is predominantly used as a cash-only payment device although it does have the
facility to accept debit card payments. The PayStation equipment in each branch consists of
the main terminal along with a magnetic card reader and a barcode scanner, all of which are
provided by a separate company, Ignenico.
§.32. PayStation works as a simple operational interface and is activated by either a barcode scan
or card swipe. The PayStation machine can also be operated manually. Once a transaction
completes, receipts are printed for both the customer and the branch.
5.33. PayStation transactions usually require third party authorisation. For example, a mobile
telephone top up request will go from the terminal to the mobile network provider, who will
then confirm that the mobile telephone network is correct, that the customer's handset is a
prepayment device and will then issue a unique code allowing the branch to credit the
customer.
5.34. The Subpostmaster obtains from the PayStation terminal a daily record showing that day's
transaction totals. Overnight, the PayStation terminal reports the day's transactions to the
Post Office Data Centre which in turn sends a Transaction Acknowledgement (see 7.41 to 7.48)
tothe branch. When logging on the next day, the Subpostmaster checks the Transaction
Acknowledgement against receipts and may then confirm the Transaction Acknowledgement,
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after which the branch's cash position on Horizon is adjusted accordingly to reflect the value of
the previous day's transactions.
Lottery
5.35. National Lottery products are provided and serviced by Camelot UK Lotteries Ltd. These
transactions are processed through a separate on-line terminal in each branch, This stand
alone Lottery or Camelot terminal is not directly connected to Horizon. The Lottery terminal
can be located behind the Post Office counter but in most instances, it is located on the retail
side of the branch.
5.36. National Lottery products are currently available in approximately 6,000 Post Office
branches with two thirds of annual revenue coming from sales of Lottery tickets and one third
from scratch cards.
5.37. The Lottery terminal is used for the sale of Lottery tickets and to activate scratch cards
before they are sold whereas the paying out of Lottery prizes and the recording of scratch card
sales is conducted on Horizon.
5.38. At the end of each trading day a daily summary of Lottery transactions for that day is printed
from the Lottery terminal by the Subpostmaster and retained in the branch (so that it can, if
necessary, be reconciled later against any Transaction Acknowledgements or discrepancies —
see below). Overnight, Camelot will send a data file containing details of all Lottery
transactions undertaken by the Lottery terminal to Post Office. This is used as follows:
Sales
5.39. The vatue of all online sales is sent to each branch overnight as a Transaction
Acknowledgement. Horizon assumes that all Lottery ticket sales are conducted for cash (as this
is the only method of payment permitted by Post Office for Lottery sales) and the Transaction
Acknowledgement therefore increases the amount of cash recorded in the branch accounts in
Horizon by the value of the sales conducted the previous day.
5.40. If the Lottery terminal is kept on the retail side of the business, and payment for Lottery
products is processed through the retail till point, the Subpostmaster must physically transfer a
corresponding amount of cash from the retail business to the Post Office branch’s cash
holdings.
5.41. If the Lottery terminal is operated as part of the Post Office counter, then the cash payments
will already have been automatically recorded in Horizon.
Scratch card stock
5.42. Packs of scratch cards are sent to branches by Camelot. Before selling the scratch cards the
branch must record the receipt of the scratch cards so that they can be tracked within the
branch's stock holdings. This is done by ‘activating’ each pack of scratch cards on the Lottery
terminal, which allocates a unique identification number to each scratch card and scratch card
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pack. tf a pack is not activated then Camelot may subsequently decline to pay aut any prize on
any winning scratch card within that pack.
5.43. The overnight data file contains details of the number of scratch cards activated at each
branch. A Transaction Acknowledgment is then sent to each branch, which increases the
amount of scratch cards recorded on Horizon as being in the branch's stockholdings.
5.44. Before February 2012, this process was manual. The Subpostmaster was required to
activate scratch cards on the Lottery terminal and then manually record the new scratch cards
on Horizon as an increase in branch stock.
Prizes
5.45. Where a customer claims a prize on a winning Lottery product, the ticket or scratch card
must be scanned on the Lottery terminal to validate the prize. If the prize is less than £500, the
value is paid out in cash by the retail side of the business. if the value is over £500 then the
prize must be paid by a cheque generated by the Horizon terminal.
5.46. Where a Subpostmaster pays out prizes in cash from the retail side of the business, they will
be recorded on the daily receipt generated by the Lottery terminal. The Subpostmaster then
uses this information to manually enter the prize payouts in Horizon each day. By recording
prize payouts, the cash position in Horizon is reduced and the surplus cash should be physically
removed from the Post Office cash holding and transferred to the cash holding belonging to the
retail side of the business,
5.47. Post Office reconciles the prize payouts recorded on Horizon (both cash and cheque) against
the overnight data file from Camelot. Any discrepancies are corrected by way of a Transaction
Correction (see 7.30 onwards}.
5.48. Scratch cards can be sold directly through the Horizon terminal or are permitted ta be sald
from the retail side of the business and later recorded in Horizon. Sales conducted directly
through Horizon will automatically make the necessary adjustments to the branch's recorded
cash and stock holdings to reflect each sale.
5.49. If a Subpostmaster choases to sell scratch cards from the retail business, a record of scratch
card sales has to be maintained so that at the end of each day the volume and value of scratch
card sales for that day can be manually input into Horizon.
Horizon will assume that all the sales have been for cash and hence the Subpostmaster must
also physically transfer the corresponding amount of cash from the retail business into the Post
Office cash holdings.
6. Horizon Double Entry Accaunting
6.1.
As well as processing transactions, Horizon is also an electronic accounting system which tracks
every transaction input to the system in a branch and ensures that relevant and correct double
entry bookkeeping is applied. Those transactions include both thase recording sales and
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services to customers as well as deliveries of cash and stock in and out of the branch. Horizon
enables staff in a branch to run reports referred to as “Balance Snapshots” as and when
required, so that they can look up the recorded amount of cash and stock that is meant to be
‘on hand.
The system's core principle is that of double-entry recording (i.e. entries generally have a
corresponding and opposite entry so as to “balance” the account). For example, if a product is
sold for cash this should in most cases result in a reduction in a branch’s stock levels of that
Particular product line and a corresponding increase in the amount of cash recorded as being
held at the branch.
A typical example of double entry would be the processing of a “personal banking” cash
withdrawal bya customer, Horizon would record a credit (a reduction) in physical cash
holdings in the branch due to money being paid to the customer. It should also record a debit
in the payments section of the Balance Snapshot to reflect the debt now due to Post Office
from the customer's bank.
The effect of this double entry system is that an input in one part of the branch's accounts will
cause corresponding changes in other parts of the accounts.
Example:
A reduction in stock (e.g. postage stamps) held in a branch, following a sale, will
automatically increase the amount of cash by the same value, as Horizon will assume that
the stock has been sold.
So if, for example, stamps to the value of £10 were sold then this would be recorded in
Horizon with the value of the stock of stamps reducing by £10 and the amount of cash H
recorded in Horizon automatically increasing by £10.
It will sometimes be necessary to manually adjust stock levels in Horizon (either up or down)
to reflect the reality of the amounts physically on hand in the branch. if however sucha
reduction in, for example, the stock of stamps was incorrect by £10, then when the amount
of physical cash actually held in the branch is compared to the amount of cash recorded in
Horizon, {assuming that all other transactions are perfectly correct) the branch will be £10
short.
In this way, the error in accounting for stamps has migrated across the accounts to manifest
itself as a cash shortfall.
However, the branch should also now be actually holding £10 more in stamps than the
amount shown in Horizon. This creates a “surplus” of stamps physically in the branch,
In this scenario, there is therefore no net overall foss. If identified by the Subpostmaster then
the error can be corrected by manually increasing the value of stamps recorded in Horizon by
£10, which will then automatically decrease the amount of cash recorded in Horizon by £10
{as Horizon will assume that as there are now more stamps in the branch, those extra stamps
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must not have been sold). This should bring in line {or "balance") the branch's accounts
recorded in Horizon with the actual cash and stock holdings in the branch.
7. Branch Operating and Reporting Procedures
7.1, In simple terms, most individual customer transactions are processed as follows: a
* Acustomer approaches the branch counter and requests certain transactions;
© The Subpostmaster selects the appropriate product or service on the Horizon terminal and,
if necessary, inputs the value of the transaction (e.g. cash withdrawal from a bank account of
£100);
* This process is repeated for each individual transaction requested by the customer (e.g, at
the same time as the cash withdrawal, the customer purchases £10 of stamps);
* Horizon groups the individual transactions together in a “basket” of transactions and
displays the net amount to be paid to the customer or which needs to be taken from the
customer (e.g. in the above situation, the net cash due to the customer is £90);
« If payment is to be taken from the customer, the Subpostmaster will select the payment. _
method (e.g. cash, cheque, debit card, etc.). This is referred to as the Method of Payment
(“MOP”);
e The Subpostmaster takes the payment from the customer or pays out cash to the customer
as required. This final payment out or in (whether by cash, cheque or other method)
records a final line in the transaction record that offsets the net value of the transactions
and brings the basket total to zero. (e.g. if a customer buys £10 of stamps for cash the
stamps would show as a negative £10 and the cash received would show as a positive £10, .
thereby bringing the basket total to zero);
*® The Subpostmaster completes the transaction in Horizon, which closes that basket from that
branch terminal and updates the branch's cash and stock records in Horizon (e.g. in the
scenario above involving a stamp purchase and cash withdrawal, the branch's cash will have
decreased by £90 and stamps also decreased by £10).
7.2.
v
Whilst it might appear from the above scenario that any errors should be easy to identify, the
source of errors during a process may not always be easy to determine. The potential impact
and consequence of multiple transactions and associated Issues is dealt with more extensively
in Part Two of this report.
7.3. For cash or cheque only transactions carried out in a branch, Horizon delivers and records the
entire sale or service to a customer, at the point of sale. For example, a bar-coded utility bill
payment, paid in cash, is completed wholly in Horizon, with no related paperwork to process
and no use of other terminals that are not connected to the Horizon system.
7.4. Some transactions, where the method of payment is a credit or debit card, require in addition
to Horizon, use of the LINK banking system accessed through a PINpad terminal.
2.
we
Other transactions also require the use of other equipment. Examples include Lottery ticket
sales and Scratch card Packs (see 5.35 onwards), which must be transacted on the separate
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Lottery terminal, Horizon is then updated the next day by Transaction Acknowledgement as
explained below,
7.6. There may also be various other steps (e.g. completing and sending various receipts and
Paperwork) that the Subpostmaster needs to take to complete the transaction, which are
specific to the product in question, such as Motor Vehicle Licences.
Stock units
7.7, There is a capability within Horizon to create "stock units". These are in effect separate ring-
fenced sets of sub-accounts within the branch's general account in Horizon, Although there are
no mandatory business requirements for how many stock units a branch has to have, or how
they are physically deployed, the creation of a stock unit by a Subpostmaster will cause Horizon
to create a separate sub-set of accounts connected to that stock unit.
7.8. If cash and stock are transferred from the main branch stock to a stock unit, this cash and stock
is then recorded in a separate set of accounts for that stock unit (and correspondingly removed
from the general branch accounts).
7.9. When a member of branch staff is preparing to serve a customer, they will fog onto Horizon
with their User 10 and password and link themselves to a specific stock unit.
7.10. Any transactions conducted will then be recorded against that stock unit, with the
corresponding changes to cash and stock levels being recorded against that stock unit's
accounts.
7.11, One of the reasons for using multiple stock units is so that the branch can operate
“individual” stock units, with each member of staff being allocated their own dedicated stock
unit. The person allocated a stock unit normally has a separate drawer in which to store cash
and stock associated with that stock unit so that it is physically separated from the cash and :
stock in other stock units or in the general branch holdings. When branches have balancing
problems, itis normally recommended to adopt this approach so that mis-balances and
mistakes can be linked to specific individuals.
7.12. Some branches operate “shared” stock units. in effect, this means that all the branch staff
serve customers from one pool of cash and stock with all transactions then being recorded
against one set of accounts. While seemingly simpler to operate, this does mean that
discrepancies cannot be linked to individual User IDs.
7.13, Stock units can or must also be set up for individual product categories (e.g. Lottery, ATMs,
etc.). This can help the Subpostmaster record all transactions for a particular product within a
separate set of accounts so that any discrepancies can be more easily identified.
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Reconciliation with third parties
7.14. Anumber of the products and services available at Post Office branches are provided by
third parties (see Appendix 2). N.B. These third parties are often referred to by Post Office as
“clients”.
7.15. When such a product is transacted, details of this transaction are communicated from
Horizon to the third party, sometimes immediately or sometimes at a later stage, by the central
Post Office finance systems. Post Office is then liable to pay the third party the transaction
value (or vice versa). An example of communication from Horizon to a third party with respect
toa single transaction would be as follows:
Example:
At Post Office branches, a customer can deposit cash in ar withdraw cash from his/her bank
account with a number a major banks {i.e. Lloyds, Santander, HSBC etc.).
if a customer wishes to withdraw £100 of cash from an account, Horizon connects to the —
customer's banking system to confirm that the cash is available for withdrawal.
Once authorised, Horizon will advise the Subpostmaster to proceed with the transaction and
to give £100 in cash to the customer (assuming that there are no other transactions in the
basket). The amount of cash recorded in the branch's accounts in Horizon would then be
automatically reduced by £100 to reflect the withdrawal. in this way, the branch's accounts
are kept in balance with the amount of cash actually on hand.
Likewise, the customer's account at the customer's bank shoutd be reduced by £100 to reflect
the cosh withdrawal from the Post Office branch.
Post Office then obtains its money back from the relevant partner bank by way of the
settlement activities administered by the Post Office Finance Service Centre (FSC).
This process would happen in reverse for a £100 deposit into a bank account, with the result
that the cash position in Horizon at the transacting branch will be increased by £100, the -
branch holding £100 more cash on hand and Post Office making a later payment to the
customer's bank of £100.
Remittances
7.16, Branches send or receive cash and stock to and from Post Office Cash Depots. This
movement of cash and stock is called a Remittance” (and is often referred to as "Remming in"
or "Remming out").
7.17. Branches may also take cheques as a method of payment from customers for some
transactions. These cheques are treated as a “stock item” in Horizon and require “Remming
out” {i.e. sending) to the cheque processing centre.
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7.18, Post Office monitors the cash levels of each branch and classifies them as either “cash
surplus” or “cash deficit” in terms of cash management.
7.19, Those branches that are classed as “cash surplus” normally have more customers who make
deposits (i.e. by making cash deposits to bank accounts or by buying products with cash) than
customers who require cash withdrawals.
7.20. The “cash surplus” branches do not require cash remittances to be sent to the branch from
Post Office, as they wil! have a net inflow of cash from customers. These branches are however
required to return surplus cash to their nominated Post Office Cash Depots via a Cash Vehicle in
Transit (2 secure means of transporting cash) in order to prevent the branch holding too much
cashon site. Post Office Cash Depots are placed in geographical locations around the UK and
each branch will be “tagged” to a particular depot.
7.21. Conversely “Cash deficit” branches are those where the money deposited by customers to
the branch does not usually cover the amount that the branch has to pay out. These branches
rely on Post Office Cash Depots to send cash to the branch in order to ensure that there is
sufficient cash in the branch to meet its needs.
7.22. Post Office’s Retail Cash Management team are responsible for monitoring the cash levels
within the branch network to ensure that branches have enough cash to serve customers and
to support effective working capital management for the network.
7.23. The decision on haw much cash a branch needs to “Rem” in or out is determined by Post
Office’s Flexible Planning System, @ software tool used by the Retail Cash Management Team.
In essence, it compares the cash declaration figures that are entered into Horizon by
Subpostmasters against the sales (receipts and payments) information. It also takes account of
the average transactions occurring over the previous six weeks trading history to identify how
much cash the branch should return or send back on their next scheduled cash delivery. This
information is communicated to Subpostmasters via Horizon using a Flexible Planning Advice.
The Subpostmaster has the option to amend the amount of cash that is planned to be returned
by or sent to the branch by contacting the Retail Cash Management Team,
7.24, Where cash is to be “Remmed out” to a Post Office Cash Depot, the branch is responsible for
placing the correct amount of cash into a remittance pouch, entering the amount that is being
“Remmed out” into Horizon and then either handing the remittance pouch to the Cash in
Transit Driver, or sending it back to Post Office via Royal Mail Special Delivery. When the
“Rem” is processed the amount of cash recorded in the branch accounts in Horizon will
decrease to reflect this.
7.25. Where cash is “Remmed in” to a branch, the cash remittance is sent by Post Office to the
branch either via a Cash in Transit Driver or via Royal Mail Special Delivery. The branch is
responsible for checking that the remittance pouch contains the amount of cash as stated on
the remittance and then logging the receipt of cash into Horizon. This will increase the amount
of cash recorded in the branch accounts in Horizon.
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7.26, Royal Mail Special Delivery is only used, on a risk-assessed basis, for fower value remittances
and, for example, where logistics constraints prohibit the use of the large, heavy armoured cash
delivery vans,
7.27, Cheques have to be "Remmed out" daily by branches. This is to enable overnight
processing and next day “clearing” of the cheques by the relevant bank. The only exception Is
cheques received on Friday and Saturday, which are sent together on the following Monday, as
Saturday is not a “banking day”.
7.28, There are dedicated Horizon pracesses, batch control vouchers and special envelopes which
branches should use as part of standard end of day procedures. These utilise normal mail
collections provided by Royal Mail employees. -
7.29. Post Office contracts with a banking industry cheque processing organisation which
validates, on behalf of Post Office, cheques received; highlights any anomalies to the Post Office
FSC; submits the paper cheques to the drawee bank if required and provides data to the FSC
about cheques both successfully processed and those that have “bounced” {unpaid cheques).
Transaction Corrections
7.30. The FSC (often referred to as “Chesterfield” by Subpostmasters because of its geographical
location) is the Post Office's “behind the scenes” accounts processing centre. It provides daily
services to third parties, branches, Multiples and customers.
7.31. The FSC is the originator of Transaction Corrections (TCs). These are sent overnight by the
FSC to branches when errors are found which have either not been identified by the branch or
have not been resolved focally. Even if the branch's accounts are in balance (i.e. there is no
discrepancy between cash and stock on hand and the cash and stock levels in Horizon), it may
be that the branch has processed transactions erroneausly or in a way that causes a Post Office
third party to refuse to reconcile the transaction with Post Office, thereby causing a
discrepancy.
7.32. TCs can be issued to rectify accounting errors arising from a wide range of issues including
errors or omissions in data entry such as mis-keying or not entering the transaction date.
Subpostmasters are provided with a list of the different types of TC and reasons for their
issuance.
7.33. Accepting a TC may result in a surplus or a shortage at the branch, or the correction of a
previous surplus or shortage. Any residual surplus or shortage should be withdrawn or made
good, as described in more detail in section 9.
7.34. Branches are required to accept ail TCs notified to them, before completing their monthly
Branch Trading Statement (see 8.8 to 8.10). This is a contractual requirement. The branch
does not have to accept the TC immediately on receipt and can instead print the Transaction
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Correction narrative and if possible take the necessary action within the days remaining until
that trading period ends.
7.35. As explained below, Subpostmasters may also dispute the TC if they fail to understand the
error made or consider that the TC does not properly apply to them. Hardcopy evidence of
how the error has occurred is provided together with contact details to allow further
information to be obtained.
7.36. TCs are often followed by enquiries to the branch, particularly if a large number of TCs are
being sent to that branch.
7.37. In 2012/13, the most common reason for TCs being issued to branches was due to errors in
“cash remittances from branch”.
Example:
A branch records remitting out £10,000 in cash and sends the cash pouch to the cash centre.
However, upon opening the cash pouch at the cash centre the pouch contains £10,010.
This creates a surplus at the cash centre and (assuming the branch otherwise balances) the
branch will show a £10 shortfall during the next cash declaration.
The FSC will then raise a credit TC to the branch to correct this shortfall. When the branch
formally accepts the TC, it will have the effect of reducing the reported Horizon cash balance
by £10 in line with the reality of the cash an hand. The double entry to this is to increase the
values recorded as “Remmed” out. The bronch should then balance in respect of this specific
incident.
7.38. The generation of a TC may be due to a discrepancy between Horizon and a third party's
records and hence the time taken to identify errors and subsequently generate that TC can
sometimes be outside of Post Office's direct control.
Example:
A customer deposits £100 into his/her bank account but, through a keying error, the branch
only records a deposit of £10 in Horizon.
in this scenario, the records in Horizon and at the customer's bank will match as both will
show a £10 deposit. The branch will have a £90 cash surplus, because the branch will have
taken £100 from the customer, but only recorded the receipt of £10 in Horizon. The
customer may then raise a complaint with Post Office directly or with his/her bank who will
then contact Post Office.
Equally should the branch mistakenly record a deposit of £1,000 rather than £100 this would
generate a shortfall of £900, which the Subpostmaster would have to pay to Post Office
unless the customer detects the error and returns to notify the branch.
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7.39, Processing a TC often results in an adjustment to the cash or stock position at the branch
within the branch's accounts as TCs can debit or credit the branch's cash figure in Horizon. It is,
however, important to note that this often (as the name implies) corrects the recording of a
transaction such that the reported balance in Horizon will align with the physical cash handled
in the transaction.
Example 1:
if a branch processes a bill payment of £100 os £10 in Horizon, the branch would show a cash
surplus of £90. If the customer subsequently receives a bill reminder that full payment hos
not been received they will normally contact Post Office to resolve the issue. When the error
has been identified, a debit TC is issued to the branch in the next trading period, because Post
Office will need to pay an additional £90 to the customer’s service provider. When the
branch processes the debit TC this will increase the branch's cash position in Horizon, thereby
creating a £90 shortfall against the cash on hand. This shortfall however sets off against the
corresponding surplus that would have been made in the previous trading period.
Example 2:
A customer presents a Transcash deposit slip to make a bill payment but during the
transaction it is established that an appropriate method of payment is not possible (i.e. the
customer's debit card is declined) so the transaction is not recorded in Horizon and no cash
changes hands.
if the branch incorrectly retains the deposit slip and does not follow the correct end of day
procedure this could result in the Subpostmaster sending the slip to Santander (who
administer Transcash bill payments taken through Post Office branches) who would then :
process the bill payment (i.e. money is poid from Post Office's account to the customer's
service provider's account).
When Post Office later reconciles the bill payment against the Horizon records, there will be
no matching payment record in Horizon and a TC will be sent to the branch. [f the branch
accepts the TC, this will after the branch's cash position and the relevant cash should then be
put in the till at that point. If the money is not put in the till, then there will be an equivalent
shortage at the end of the trading period.
7.40. TCs can be disputed with the FSC. {f the TC dispute is upheld then a compensating TC will
be issued to the branch. fit is not upheld a written appeal can be made to the relationship
manager in FSC who will review the case and make a final decision. Any payment required
from the Subpostmaster as a result of the disputed TC will be suspended until the review is
completed.
Transaction Acknowledgements
7.41. Some Post Office transactions, for example, Camelot/Lottery, PayStation, or Post & Go are
not transacted through a Horizon terminal but instead use separate equipment (see section 5).
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7.42. However, the cash taken for these transactions by the branch needs to be accounted for in
Horizon as part of the overall branch cash and stock holdings. A Transaction Acknowledgement
(TA) is therefore used to ensure that Horizon can be synchronised with the records on the third
party equipment.
7.43, Transaction Acknowledgements (TAs) were introduced to automate the process of
reconciling the data being sent directly from the separate machines and the amount of cash
that should be processed through Horizon.
7.44. The transactions for certain Camelot products, PayStation and Post and Go are processed
overnight and a report of the volume and number of transactions is sent by the third party
equipment to Post Office. Post Office then sends the TA overnight to the branch confirming all
transactions that took place on the third party equipment during the previous day. For
example, National Lottery tickets (not scratch cards) are sold to customers via the National
Lottery terminal.
7.45. The data from these sales goes straight to Camelot and the branch takes payment for the
ticket and puts the cash into a separate drawer on the National Lottery terminal. The following
day, the branch's Horizon terminal will be sent an electronic TA, which will appear as a message
for the first person who fogs onto Horizon asking for confirmation that itis correct. Once
accepted the TA will make the required adjustment to the branch's accounts and inform the
Subpostmaster how much cash should be transferred from the National Lottery till drawer to
the Horizon terminal drawer.
7.46. Prior to TAs being launched in 2012, the Subpostmaster would have to obtain the relevant
print outs from each machine and then input these figures into Horizon and manually reconcile
any cash owed. The launch of TAs removed this manual process and hence also removed a
source of error.
7.47, Even with the TA process, errors can occur if the correct amount of cash from the Lottery
terminal is not transferred to Past Office, or if the user accidentally pays the cash amount into
the wrong stock unit. Alternatively, if the Subpostmaster accepts the TA but does not pay in
the relevant cash then there wilt be a shortage.
7.48. The most important operational aspect of the TA process is that a TA has to be formally
“accepted” in Horizon, normally at the start of daily trading.
8. Branch Reporting and Management
8.1. As part of a branch’s standard operating procedure, Subpostmasters are required to produce
and review a number of in-branch reports to ensure that the branch is functioning effectively
and to allow Post Office to monitor cash and stock levels against its records. These include:
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8.2.
8.3.
8.4,
85.
8.6.
8.7.
8.8.
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Daily Cash Declaration
Staff at each branch are required to count and declare the amount of cash on hand at the end
of each day. The actual cash on hand is recorded in Horizon by the Subpostmaster or his/her
assistants. If there is a difference then Horizan will show any “discrepancy” between the cash
‘on hand and the amount of cash that should be in the branch in order for the branch to
balance.
Post Office provides a set of tools that can assist Subpostmasters with tracing or identifying
discrepancies. For example, transaction logs can be run which show the transactions that have oo
taken place. These logs can be searched using parameters such as product type, user and time
of the transaction. Event logs also provide information about user activity and a “Balance
Snapshot" shows what Horizon believes to be the state of the branch’s accounts at that point in
time. The availability and general use of these tools to ascertain what transactions have taken
place in branch and the amount that has been recorded against each transaction is commented
on further in Part Two of this report.
Before Horizon Online was implemented, Horizon reports were available in branches for 42
days. These reports are now available in branch for 60 days.
Weekly Balance
Post Office recommends that, every week, a branch undertakes a full cash and stock count.
The actual amounts of cash and stock on hand can then be compared to the figures recorded in
Horizon, This should help the branch to identify and correct any discrepancies in a timely r
manner before they become combined with others and hence become more difficult to isolate.
in the event that a surptus or shortfall is found on a weekly balance, it can be declared and
transferred into a suspense (or Discrepancy) account pending resolution by the month end.
Amounts are typically held in suspense for a few days or weeks to allow the Subpostmaster
some time to try to resolve the discrepancy. In the event that the discrepancy cannot be
resolved by month end then, if the amount is less than £150, the Subpostmaster is expected to
"resolve locally" i.e. make good from his/her own funds. If the amount is greater than £150
then it can be settled centrally as explained more fully in the following section.
The Daily Cash Declaration and the Weekly Balance are tools that Subpostmasters can use to -
manage their branches. Declaring a loss or surplus through either of these reports does not
trigger any action by Post Office at that stage.
Monthly Trading Period Rollover
This is similar to the Weekly Balance but is mandatory every month. It requires any
discrepancies (including those put into suspense during the month) to be resolved, This
process is also called “rolling over" or the "end of trading period" process. At the end of the om
monthly process, the Subpostmaster is required to produce a Trial Balance, which should be
retained in the branch and used to compare to the physical cash and stock on hand. After
making adjustments to make good any losses or reduce any surpluses, the Subpostmaster then
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has to print off and sign a "Branch Trading Statement". This statement confirms that the cash
and stock shown in the accounts match the cash and stock actually heid in the branch (with any
discrepancy having been declared ~ see section 9).
8.9, Subpostmasters are contractually required to complete a monthly balance as described above.
If a branch does not roll over into the next trading period when they are scheduled to do so,
Post Office will instruct the branch to rectify the situation. Failure to roll over at the end of
each trading period constitutes a Breach of Procedures as set out in the Subpostmaster’s
standard contract. In the event of a Subpostmaster failing to roll over he cannot open anew
trading period. However, it is possible for the branch to continue to trade, albeit in the current
trading period.
8.10. In order to address discrepancies or Transaction Corrections, the Subpostmaster should
follow the processes set out below. This should allow an issue to be resolved or to be further
investigated by contacting Post Office's Finance Service Centre (FSC), In the case of a further
investigation, a disputed item remains suspended until the Post Office has investigated the
matter.
Cut off routines
8.11. Mandatory daily and weekly “cut off routines” are in place to enable branches to validate
transactions, which should ensure that the paper records match Horizon. This also assists in
the identification of errors before month end. Examples include, validating the physical
cheques held in branch against Horizon to send to clearing or the banking summaries to send to
Santander. Validation of physical records against Horizon's records can also help detect errors
or omissions but only if the nature of the error is understood,
9. Resolving surpluses or shortfalls of cash or stock
9.1 At the end of a monthly trading period the Subpostmaster is required, subject to one exception,
to certify that the branch has the cash and stock which Horizon states should be present.
9.2 The one exception relates to a shortage. if the Subpostmaster has less cash or stock than
Horizon states then, if the shortage is not made good there and then, the two options of settling,
centrally as set out in (9.5) below are available.
9.3 It follows, that if the Subpostmaster has more cash and stock than Horizon states, then the '
Subpostmaster does not owe that surplus to Post Office.
9.4 For stock discrepancies, the Subpostmaster should process a sale, a sales reversal or a manual
adjustment to correct the volume of stock shown in Horizon, to make sure that it balances to the
volume of stock actually held in the branch,
9.5 If, following the monthly rollover, there is a shortage of cash (when the cash on hand Is less than
the amount of cash recorded in Horizon), then Horizon presents the Subpostmaster with three
options to remedy the deficiency: ‘
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* Make good - the Subpostmaster can elect to put cash or a cheque into the branch from
his/her personal funds to make up the shortage.
* Settle centrally and pay ~ the shortage is transferred to the Subpostmaster’s personal
account with Post Office. The cash figure in Horizon is reduced to bring it in tine with
the actual cash on hand at the branch. At this point, the Subpostmaster owes the cash
loss to Post Office as a debt. This debt can be repaid by either (a) a direct payment from
the Subpostmaster to Post Office or (b) by deductions from the Subpostmaster’s future
remuneration although in this latter option the Subpostmaster may not commit more
than 25% of his/her net pay to such deductions.
* Settle centrally and dispute the shortage - if the Subpostmaster believes that the
shortage was not his fault or could be resolved through other means, then the debt will
be suspended to allow time for the shortage to be investigated and remedied. The
Subpostmaster can dispute a shortage by contacting the Network Business Service
Centre, Cash Centre (for remittance disputes) or the Finance Service Centre at Post
Office to have the debt suspended pending an investigation. The extent to which
Subpostmasters are aware of and make use of this third option is explored more fully in
Part Two of this report.
Part Two of this report will also make reference to situations where certain
Subpostmasters claim to have been under pressure to declare a balance of cash and
stock in branch, which did not reffect reality.
9.6 If the cash on hand in a branch is more than the amount that Horizon shows should be present
then the actual cash needs to be adjusted in order to balance the books. The Subpostmaster will
reconcile the amount of cash on hand at that moment in the Trial Balance process described in
8.8 above and then remove sufficient cash to bring the branch back into balance (see comments -
in 7.30 onwards describing the Transaction Correction process}. This results in Subpostmasters
being entitled to withdraw cash to remove surpluses, without the need to report that to Post
Office, other than through the Trial Balance.
9.7 It is common practice for Subpostmasters to keep surplus cash in a separate location (such as
the retail business safe) until their investigation into the gain is completed and/or a Transaction
Correction is received. In the event that a declared surplus is eventually determined to be a
genuine one then the Subpostmaster is entitled, under the terms of the standard
Subpostmaster's contract, to retain it.
9.8 If however a Post Office investigation does not fully eliminate carelessness, negligence or error
then the Subpostmaster is tiable for the loss and is required to personally settle any amounts
due. In order for the Subpostmaster to challenge this liability, the burden is on the
Subpostmaster to determine the source of the error and deficiency.
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10. Branch Error Analysis
10,1, This section describes how some errors might occur and what facilities are available to a
Subpostmaster to identify or correct those errors.
10.2. There are a variety of reasons why a branch may encounter a discrepancy between the
amount of cash and stock on hand and the amount of cash and stock recorded in Horizon — this
situation is commonly referred to as a "balancing discrepancy".
10.3. There are number of situations in which a balancing discrepancy might occur. It should be
noted that some of the situations described may cause a gain for a Subpostmaster, or only
cause a temporary foss and may cause the real reason for the losses to be hidden:
© Ifanerror causes a surplus of cash in the branch, this may offset other losses caused by
other errors. In that scenario, the other losses or errors may not be revealed, as overall,
the branch’s accounts may balance, show a surplus, or a smaller loss;
© ifa surplus error occurs in one month but is later discovered and corrected viaa TC ina
subsequent month, and the accounts for that month may show a loss even though al
transactions in that later period have been processed correctly.
Example:
A branch suffers two errors, one creating @ £100 gain and another causing o £100
loss. At the end of the trading period, the branch's accounts will balance as the two
errors cancel each other out for balancing purposes.
if in the next trading period the couse of the surplus error {i.e. the gain of £100) is
discovered, a Transaction Correction (TC) will be sent to the branch which increases
the amount of cash recorded in the branch accounts. If all the remaining
transactions throughout the rest of that trading period are conducted correctly the
branch will still show @ loss at the end of the later trading period due to the TC.
Therefore, whilst the loss of the branch shows in the current trading period, the error
which caused the loss occurred in the previous trading period.
10.4. Anumber of the errors as described below may only be visible to those working in the
branch. When discrepancies occur, Post Office normally seeks to find possible explanations
other than those below. !f no other source of the discrepancy can be found and system error
can be eliminated or discounted then, by a process of elimination, the discrepancy will have
most likely occurred through an error in the branch.
Mis-key
10.5. Amis-key is the term used when staff enter the wrong value of a transaction into Horizon I
compared to the actual amount of the transaction. '
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Example:
A personal banking customer wishes to deposit £1000 into his/her account and the person
serving the customer mistakenly enters £10,000 but only £1000 cash is taken from the
customer, This would create a shortage of £9,000 for the branch.
In order to rectify this mistake, the Banking Team within the FSC has to contact the
associated client bank which in turn will contact its customer. The customer will then be
asked to confirm the omount deposited at the branch. However, the only receipt printed
from Horizon will have been given to the customer and will show a deposit of £10,000
and, therefore, the rectification process relies largely on the actions of the customer and
their bank.
10.6. As aresult, an easy to make keying error, by branch personnel, could result in a customer
enjoying a windfall benefit, with the Subpostmaster having to make good this discrepancy.
Mixing retail and Post Office business
10.7, Generally, a branch will maintain a physical separation between retail and Post Office cash.
Mixing these two sets of cash can lead to Post Office cash being lost to the retail business and
vice versa as it can become difficult to track the amount of cash that should be allocated to the
Post Office and retail sides,
Errors in cash handling
10.8, At the end of a customer transaction, payment normally needs to be made to or received
from the customer. Even if the transaction is correctly recorded in Horizon, branch staff may
take or hand out the wrong amount of cash. This error could be as simple as miscounting cash
before handing it to, or receiving it from, the customer.
Example:
A business-bonking customer may present documentation to deposit £1000 into his/her
business banking account.
if, at the end of the transaction, £1000 in cash is given to the customer instead of taking
£1000 in cash from the customer there will be a shortage to the branch of £2000, made
up of the deposit entry of £1000 being correctly input into Horizon (Horizon then expects
to receive £1000) and the settlement out to cash of a further £1000 which will reduce
the cash in branch.
10.9. In many cases the honesty of the finder and the ability to identify the money as coming from
the branch is required if the money is to be returned to the branch.
Miscaunting cash on hand
10.10. Cash must be physically counted at the end of each day and when rolling over at the end of a
trading period. When completing the physical cash count, notes and coins can sometimes be
miscounted or missed altogether.
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10.11. If cash is temporarily mislaid one day and found the next, it can lead to related shortages
and surpluses on different days or in different trading periods. in the midst of many other
activities, branches may not associate the two and may dispute part or all of the outcomes.
10.12. Another instance of where this can happen is when a Post Office product is sold on the retail
side of the business. Most Post Office products must be sold from the Post Office counter in
the branch premises. A few Post Office products, such as National Lottery scratch cards, are
permitted to be sold from the retail business. However, it is the Subpostmaster’s responsibility
to make sure that any cash taken from the sale of such products is transferred from the retail
business to the Post Office side, and properly counted in any cash declaration.
10.13. Cash remittance pouches that have been prepared for the Cash in Transit collection drivers
may be erroneously counted as part of the cash declaration. Horizon does not include this
amount within the cash holding figure (as it is deemed to have been remitted out of the branch
even if the pouch has not yet been physically collected) and, therefore, the branch could be
declaring a gain or inadvertently hiding a loss.
Cash remittance errors
10.14. If there is mistake made between the amount that is “Remmed’” in or out and what is
received from, or sent to, the Post Office Cash Centre, then this will lead to a branch
discrepancy. When a pouch is received from a branch, the handling clerk at the Cash Centre
opens the seal and empties the contents onto their workstation, which is monitored by CCTV.
This is the same for pouches that are made up in the Cash Centres and sent to branches.
Example:
If a branch has bagged up £25,000 to send to the Cosh Centre but enters £20,000 into
the system then there will, in the short term, be a shortage of £5,000.
if the cosh hos left the branch then the mistake cannot he rectified by the branch. The
cash will be counted at the Cash Centre and a Transaction Correction will be sent to the
branch to rectify the branch account.
Stock remittances
10.15. Branches receive their stock (postage stamps, Motor Vehicle Licences, etc.) from Post Office
either via Cash in Transit or Royal Mail Special Delivery. The branch is responsible for checking
at the earliest possible opportunity that the amount of stock received exactly matches the
advice note delivered with the order and “remming” the stock onto the correct lines in Horizon.
10.16. As the delivery can often occur during branch opening hours it may be impractical to carry
out a full check immediately as to do so in an effective manner could require the branch to be
closed for a period, In these circumstances an immediate cash count would not be carried out
on delivery of the cash unless it was required immediately for operational purposes.
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Cheque handling
10.17. Branches can accept cheques as payment for certain products and services. Customers can
also cash personal cheques up to a certain amount. Branches may also accept deposits for
certain partner banks.
10.18. There are set procedures that must be fotiowed in branch at the end of each day to ensure
that the cheques are handled correctly, the customer's bank account is debited accordingly and
Post Office can settle the client accounts. Typically there are two scenarios which might cause
a loss:
A cheque has been accepted for a non-cheque acceptable product (i.e. foreign exchange
sales). By accepting payment by cheque for a non-cheque acceptable product, it may .
not be possible to link a missing cheque to a transaction record. This is because the
Subpostmaster may have taken the cheque for payment from the customer, but
because the product did not permit cheque payment, Horizon would not present this
option on the counter terminal. The Subpostmaster wauld therefore have to
erroneously select another payment option (i.e. cash).
The method of payment has nat been correctly recorded in Horizon.
Example:
if a cheque is presented by o customer to pay for a transaction, but the transaction is
accidently settled as a cash transaction, the value of cheques held in the branch
recorded by Horizon will not match the value of the actual cheques held in the
bronch.
At the end of each day a cheque listing is printed from Horizon, which should be
checked against the cheques held in branch and if it does not match, Horizon should
be corrected before remitting the cheques to Post Office. After “Remming out” the
cheques, a further cheque listing should then be printed to confirm that no cheques
are held in branch.
Ifo branch has not ensured that the cheques in branch match Horizon’s record
before “Remming aut” those cheques, then the cash in the branch will show a
shortfall and the amaunt that is received at the cheque processing centre will not
match the amount that has been entered into Horizon. This is because Horizon
calculates how much cash should be in a branch bosed on the “cash” settlement
option that is available ot the end of each transaction. Therefore, if the “cash”
option has been selected instead of the “cheque” option, Horizon will expect there to
be more cosh in the branch than is actually held,
This may generate a Transaction Correction to correct the account unless the branch
reverses the transaction and records it occurotely os a cheque transaction.
10.19. Branches should follow a process to ensure that the amount of cheques recorded as held in
branch balances to zero. This process is called “cutting off”. If the cheques are not “cut off” at
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the end of the day the cheque listing on the following end of day procedure will not agree with
the actual value of cheques held in branch.
10.20. This is corrected in the same way by amending the “cheque on hand” figure to show the
correct vatue of the actual cheques held in branch. The value of the cheques in branch is then
sent out before a further cheque listing to confirm a zero entry is printed.
10.21, itis Post Office policy that a branch will only bear the cost of a lost cheque if the branch has
not followed proper procedures. if the root cause of a lost cheque is unknown or attributed to
some other cause outside of the branch, Post Office will normally absorb this loss and not pass
it on to the Subpostmaster. In the majority of cases, Post Office either mitigates the loss
caused by a lost cheque by obtaining a replacement cheque from the customer or absorbs the
loss itself, Only a small number of missing cheque cases result in TCs being issued.
Accidental loss
10.22. Other losses may occur accidentally in branches. For example, money dropped in bins with
rubbish, money dropped or knocked into mail bags, and money left on counter tops taken by a
customer without branch knowledge.
Transacting from the wrong stock unit
10.23. As noted in 7.7 to 7.13 above there is a capability within Horizon to create "stock units",
which are, in effect, "virtual tills". A member of staff within a branch, when serving a customer,
will log onto Horizon with their own User ID and password and can tag themselves to a stock
unit containing cash and stock {either their own individual stock unit or a shared stock unit).
10.24. Ifa user accidentally links or tags to the wrong stock unit and serves a customer or transfers
cash or stock, then the accounts will record the transactions against one stock unit but the
physical cash or stock will move in or out of a drawer allocated to a different stock unit. Any
transactions carried out will then be recorded against that stock unit, with the corresponding
changes to cash and stock levels being recorded against that stock unit's accounts.
10.25. If spotted, then this can be corrected by either reversing the transactions and allocating
them to the correct stock unit, or by calculating the cash value of the transactions and
transferring the total amount to the correct stock unit.
10.26. In theory, there should be no net overall discrepancy to the branch, as any losses in one
stock unit will be compensated by the gains in the other stock unit. However, taken in isolation
this can appear as if an error has accurred in one of the stock units and can cause confusion,
obscuring other errors.
Outstanding transfers between stock units.
10.27. Where a branch has more than one stock unit in use (see above) there may be times when
cash and/or stock is transferred from one unit to another. For example if stock unit A is
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running short of cash, stock unit B may transfer money to allow customer service to continue
smoothly.
10.28. The user in stock unit B should choose the transfer out option in Horizon and choose the
correct stock unit (in this case stock unit A) and transfer the cash out. A receipt is printed
which is kept in stock unit B to confirm this.
10.29, The user in stock unit A then needs to accept the cash in Horizon and print their own receipt
to confirm this. A report called “Transfer Reconciliation” can be printed from Horizon to
confirm that there are no outstanding transfers pending and that all totals sum to zero.
10.30. Failure to do this can cause cash or stock to be missed from cash and stock counts.
Product specific errors
10.31. Failure to follow the correct process for accounting for certain products can also cause
errors, A good example is the accounting process for Motor Vehicle Licence (MVL) discs
{commonly referred to as tax discs}.
10.32. Branches will receive MVi discs from Post Office, which they have to “Rem” into their stock
using Horizon. When the discs have passed the time where they can be put onto a vehicle, the ‘ahs
branch is responsible for destroying the discs and following a process to inform Post Office that
they have been destroyed.
10.33, When destroying the discs, if the branch does not follow all of the steps of “spoiling the disc”
and remitting it to Post Office, Horizon will stif! record the disc as being in the branch even
though it has been destroyed.
10.34. When the branch carries out the end of the trading period rollover process and a full count
of the discs is undertaken as part of the stock balance, the number of discs in branch will not
match the amount recorded by Horizon.
10.35, Whilst this does not create a cash shortage, branches are held liable for missing discs at a
charge of £41,50 per disc, because Post Office is accountable to the DVLA for the missing discs.
10.36. Failure to follow the correct reversal procedure for a MVL disc may also lead to a branch
discrepancy. For example, a customer asks to buy a car tax disc and the transaction is
completed in Horizon, but if no payment is actually taken, the branch has to reverse the
transaction and the disc. If they only reverse the disc out of the system then the stock of discs
will balance, but the branch cash will not balance.
Theft
10.37. Theft by branch staff can and has occurred involving staff taking cash or stock directly from
safes or drawers or colluding with a customer to generate a gain for the customer and an
offsetting loss for the branch (this being ultimately borne by the Subpostmaster).
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10.38. These shortages would be identified when a physical cash count and declaration is made,
but it is not possible for Post Office to identify when the actual theft occurred, Unless the
person is caught in the act of taking the cash, it is probable that the loss would only be
discovered at the end of day cash declaration or at the time of completing the Branch Trading
Statement.
10.39. The branch staff may then be unaware of how the loss had occurred. Some thefts may also
be accompanied by an effort to disguise the theft (i.e. creating false transactions or gains).
Whilst it may be possible to identify the User ID that was used to process these transactions it
may be difficult or impossible to prove exactly when the theft occurred.
Example:
Cash or stock may be falsely declared to give the impression that the cash or stock is in the
branch when in fact it has been stolen.
“Phantom” cash remittance pouches could be created to mask an amount of cash that is
missing but the pouch is reversed before the dispatch. For example, Horizon does not take
. into account the amount of cash in pouches when it calculates the amount of cash that it is
expecting to be declared. So, if cash is missing before the cash deciaration is made, the
branch could make up a cash remittance pouch to cover the discrepancy, so in effect the
branch will not show a discrepancy in Horizon. Once the cash is declared, the branch will
reverse the remittance pouch from the system.
Hardware failure
10.40. In cases of hardware failure requiring the replacement of branch equipment there is a
possibility that not all data will have been successfully replicated before the failure of the old
hardware with a consequent possible loss of data. There are however checks and procedures
available, that if properly followed, should allow such transactions to be identified.
Conclusion
10.41. We have described a number of the operational functions and facilities used by
Subpostmasters, supported by examples of transactions and their processing by Horizon. We
have also highlighted some areas where the potential for confusion and error may occur.
10.42. Many of these issues are described in more detail in Part Two of this report where various
issues are more fully explored
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Appendix 1.
Abbreviation Terms Meaning
; IThe glass fronted screen found in many branches. Its not bullet proof but usesI
Aas ‘Anti Bandit Screen I Fety glass and is intended as a deterrent for criminal activity.
. credit-card sized identification card that is presented by the Cash in Transit
ace Authorised Collector's Card ter wha collects/delivers cash and stock elther to or from a branch
Anvnchronous Digital [THe the dedicated broadband tine thatthe Horizon system uses to send and
ADSL y receive data to our servers which links the Horizon system to our data and
Subscriber Line
client systems
Firansaction available in selected branches where specialist equipment records
Act Application Enrolment I personal information such as fingerprints, photos and signatures for certain
identifi purposes, such as extension/application of immigration visas and DVLA driving
licence renewals
IThe blue airmail sticker that needs to be stuck to all airmail mails items posted
Airmail Labels
jin branch
Airsure A priority averseas mail service which provides an electranic confirmation on
delivery and provides extra campensation cover for contents
lAmEx or “Amex, isa diversified global financial services company. They
Amex American Express _Iprovide our traveller's cheques and cards are also accepted as a payment
method for certain transactions
: We have a number of processes in place to prevent our branches from being
ame ‘Anti Money laundering I sed to launder money which has been gained through illegkimate means
This is a Post Office Team who make initial and ongoing engagement with our
ANC ‘Agency Network Change [Agency Network branches forall relocations, refurbishments and equipment
maves.
Annual Policy IA 12 Month Travel Insurance Policy
An APS transaction is one where a customer presents a bili which has a
barcode that can be scanned or a card that can be swiped, where the
APs Automated Payment Service I, ro:mation is sent directly from the Horizon system to the client's data
systems.
- Tr
ae Alarm Recehing centre [cette managed by Romec FAS and monitoring branches installed with Post
Office Ltd alarms.
ARQ, ‘Audit Retrieval Query I request for Horizan archived Information.
ASM Sales Manager Manager of a set of Post Office branches that focus solely on their sales
Aree performance and initiatives
IA computerized machine that dispenses cash to Banking customers, often
al™ Automated teller Machine II ferred to as ‘Cashpoint! or Hole in the Wall
Back Office IA jocation within a branch where the balancing takes place. Also an area on
ithe Horizon Onfine System where accounting processes are handied.
Balance Report
[A paper report processed from Horizon computer system that shows a
summary of transactions done ina set timeframe for 2 particular stock unit
Jaiong with a summary of deciared remaining cash, value stock (stamps, Postal
lorders etc} This is then signed by the Agent as being correct and on hand.
Balance Snapshot
A paper report processed from Horizon computer system that shows a
summary of transactions done in a set timeframe for a particular stock unit
along with a summary of system derived semaining cash, value stock (stamps,
Postal orders etc) based on sales and transactions completed at that time.
Although this shows accurate transaction volumes and values, this will show.
lwhat the system believes should be on hand for cash and value stock, based
lon sales put through the Horizon system
Barcode Reader
[An electronic hand held device that is used to scan barcodes for processing
transactions
BAU Business as Usual [Normal way of working.
BOM'S Business Development [Previous term for a Post Office manger who managed a group of Post Office
Managers [branches/areas. Part of Network & Sales Directorate.
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Appendix 1
BFPO British Forces Post Offices [4 Postal service which allows customers to post items to Forces personnel
Iaround the world, sometimes free of charge
BFPO Number British Forces Post Office Numbers are for @ given Forces base/ location where
they are identified by a number rather than an address for security reasons
BOP Back Office Printer [An Ad size printer, used for printing off selected reports, Le. Branch Trading
Statement.
IA period of time between 2 branch declared balance. Normally completed on aj
BP Balance Period Wednesday and covers the last seven days but can be a smalier or larger
Itimeframe. Can have multiple Batance period within a Trading Period
[An individual code which identifies a Post Office branch. Formerly known as a
h
Branch Code IFAD Code {Financial Accounts Division)
Branch Focus IA weekly publication which is sent to branches. This shows updates to
transactions and products/processes as a reference material.
‘Branch Standards The expected criteria that a branch should meet. Could be transactional or
compliance based.
fan Ad paper report which & signed a3 a declaration of the month's wading
loutcome. This summarises transactions performed and lists the cash and Stock]
TS
Bs Branch Trading Statement I. hand atthe end of « Post Office Trading Period. This remains in branch for
reference and inspection as appropriate.
om Granch Manager [A€Twn branch term that relates tothe person with responalblty forthe
branch,
[A Post Office branded card that can be pre loaded with cash to pay towards
Budget Card Post Office products, mainiy bill payments. Often used by people with low
income who use this as @ way of maintaining household budgets.
Branch Code IA seven digit numerical code that identifies each branch in the network.
Bulk Cash [Cash in branch which is secured in the safe until required
Bulk Stamps Postage Stamps which are secured in the safe until required
Post Office stock (Car tax discs, Postal Orders, other items of value) which is
Bulk Stock secured in the safe until required
Bureau De Change A counter where you can exchange foreign money
CRIRT IContact and issue Resolution Team
[An individual who looks after a number of branches and deals with
interviewing potential new Operators, enforcing contractual
CA
Contracts Advisor standards/procedures in a branch and having ownership of
Isuspending/terminating 2 branch's contract to operate a Post Office
he f
cA Chit Aviation Authority [TRE CARenforces international ceguations which govern the transport o
dangerous goods by road, sea and al.
CAM Crown Area Manager Direct manager of a set of Crown Post ‘Office branches that focus solely on
their sales performance and initiatives.
The process of making a formal and complete statement of the physical Cash
Cash Dec Cash Declaration holdings within the till using the Horizon terminal. This is done every night and
allows for cash usage to be monitored
The process of ensuring Post Office Branches have the correct levels of cash to
Cash Management carry out business procedures
Cash on Hand [Cash that is physically held in individual stock units
cc Cash centre A centre that manages and distributes value items for the Post Office network;
cu Customer Care Unit __I "5 isthe team responsible for responding to or seeking further information
ito resolve customer complaints or enquiries.
cru Cash Finding Unit JGeneric term for 3 range of units used at aif screentess working positions.
Cheques [A written order directing a bank to pay money for a product/service
Chesterfield Term used for the PRBA team based in Chesterfield. Now known as the
Finance Service Centre
Cash in transit or Cash & Value [Post Office Ltd business involving delivery and pick-up of cash to/from
omer in transit branches and other businesses.
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Appendix 2
IA customs label the customer completes which details the contents of 8
ts i]
cna Customs Declaration Label Ie col, this is affixed onto overseas mail for goods up to the value of £270.00
[A customs label the customer completes which details the contents of @ .
N23 Customs Declaration Label I parcel, This is affixed onto overseas mail, the contents of which are valued in
excess of £270.00
These are agreed between Agents and Operators with Post Office Ltd prior to
appointment and form part of the Contract for Services or Agreement signed.
if iment
CoA Conditions of Appoint Examples of CoAs include - The official opening hours. Details of new signage -
required, Ete.
7 -
Coin Hopper fA container where the coins that are immediately available for pay outs are
held
coin sets A selection of Coins produced from the Rayal Mint for commemorative as
loccasion which are available to buy from selected branches
come [A counter ina branch that enables customers to be served bath retail products
I& post office transactions at the same time.
Comms Communications
Compensation [A form of remuneration for loss or damaged goods c
[Where different settlement rules apply for one or more lems In a session (eg.
Complex Basket lone item can be settled with a debit card but another item can only be settled
by cash),
Compliance A set of rules and regulatory control that affect the way we sell praducts and .
services in our branches.
lWhere more than one mail tems are sent and addressed to the same
Consignment destination. They are charged on a total weight basis, rather than on individual
pricing
IA customer receipt that proves that a mail item has been accepted over the
iP iter, he t
cop Certificate of Posting ost Office counter. Can be hand written or computer generated. This does
not guarantee delivery, merely proof that the clerk has accepted the item at a
lace and date.
IA printer that supplies customer receipts for goods and services using a printer}
Counter Printe
“ aa roll, rather than Ad paper.
Pr Cash Packet Transfer
cpu Central Processing Unit IThe CPU is the brains of the computer where most calculations take place.
Credence Post Office Management Information Reporting System.
Credit Card A plastic card issued by a banks for the purchase of goods or services on credit,
[A sales technique used to inform customers of related transactions. le. Ifa .
Cross Sell customer asks for foreign cusrency, we would introduce Travel insurance as a
oduct
Part of the Network of circa 300 branches that Post Giffice itd own and have .
Crown Office
ldirect employees running the branch.
A
0 Community Sub office branch that is sun by an independent operator, generally only open for
restricted hours.
The validation that changes to direct & indirect customer material and/or
Customer Experiance lcommunication to not cause @ negative impact.
A locally accepted times for last acceptance of mails and doing daily
Cut Off Times, paperwork to allow for summaries to be produced. Items taken after this pointI
would be sent/processed the following working day
o1 Driving Licence Application Form
IA metal stamp that gives an impression on a receipt/bill which provides
Date Stamp verification of a transaction showing the date and location of acceptance
BDA Disabilty Discrimination Act. [AP Actof the UK Parliament which has now been repealed and replaced by the
Equality Act 2020
Debit Card JA plastic card issued by a banks for the purchase of goods or services.
\A postage stamp that is part of a regular issue of @ country's stamps. These
Definitive Stamps Igenerally depict the Queen's Head or the individual country emblem and may
lor may not shaw a value.
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Appendix 1
0G Dangerous Goods Items of mail that are considered a hazard/risk when in transit
[A United Kingdom Act of Parliament which defines UK law on the processing of
DPA Data Protection Act
ia en data on identifiable living people
Driver and Vehicle Licensing
DVLA agency IGovernment body that deals with driving licences and motor vehicle licences
owe Department of Work & I vernment body that deals with benefits payments
Pensions
[An Act of the UK Parliament that gives clear guidance on discrimination and
A
£ Equality Act how to treat all individuals fairly
eu European Health insurance [A plastic eard issued by the NHS which allows for free health care at certain
Card European counties.
End of Day procedure collating the day's transactions and despatching necessary paperwork
ETOL Electronic Ti
E-Top Up Card A card swiped through the Horizon system that credits a mobile phone with
airtime
E-Voucher A receipt generated from Horizon to credit a mobile phone with airtime
FAA Financlal Assurance Audit
Fast Drop is a new service available with Royal Mail Online Postage that helps
customers time at the Post Office®.
Fast Drop The service is free and is available with a range of postal services, which can be
dropped off in selected branches
FCA Financia} Conduct Authority IA body that regulates tirms that undertake financial services activity in the UK.
A field based Post Office employee who assists post office agents with the
Fea Field Change Advisor racess of transforming or relocating their branch.
lOften bought by Philatelists (stamp collectars) An envelope that customers canI
FOE First Day Envelopes buy to affix special issue stamps on and get hand stamped on the first day of
the stamp issue.
The process of going through and declaring all cash plus stock in hand, as per
Balance Report, and committing to the figures. This will then produce a ‘Final!
Fi
inal Balance balance report which the Operator should sign as a true reflection of the items
in branch
Foreign overnight cash i
FONCH anil IAmount of foreign currency declared as being held in branch overnight
Foreign Currency Currency from another country
Fortress [A secure counter serving position within a post office
[A post office with franchise contract. Usually operated from ex Crown
FPO Franchise Post Office {Branches where the operator isa ‘High Street’ chain. le. WH Smiths, These are
run using their own staff.
#s Fujitsu Services The company who develops and maintains the Horieon equipment
Regulator of all providers of financial services in the UK. The FSA has now
FSA Financial Services Authority [become two separate regulatory authorities, the Financial Conduct Authority
and the Prudential Regulation Authority
, JA field based Post Office employee who delivers new entrant training,
Ff it pport. i
sa Field Support Advisor I onducts audits and intervention activity within the post office network.
Formerly P&BA and based in Chesterfield. They collect and monitor data from
fe Finance Service Centre I snsactions and liaise with our external clients if discrepancies are found
[A pant office employee who works ina Crown Post Office. They discuss and
FSS. Finencial Services Specialist introduce Post Office financial products to customers but cannot give advice,
merely factual information
FTL Field Team Leader IManages the activity conducted by FSAs
aid Flip Top Tl Used in branches that have open plan or combi counters.
FUB Follow up Balance
Gains IA discrepancy showing a higher value between physically counted assets and
ithe expected assets based on sales on Horizon such as cash/stock etc.
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Appendix 2
[A network point that acts as an entrance to other computers on the same
Gatewa
wey internal network.
The Giro Stip is pre-printed Giro stationery inserted into the slip printer to
produce a summary of Giro transactions taken on that day which need to be
Giro Slip manually dispatched to the processing centre (Summary of transactional
receipts or payments taken on behalf of Santander which was formerly
IAlliance & Leicester and prior to that Girobank)
[A Parcelforce Worldwide service which provides a basic service for sending
Global Economy mail with no guaranteed delivery times to over 200 countries
[A Parcelforce Worldwide service which provides a Guaranteed delivery
Global Express [timeframe by Airmail
[A Parcelforce Worldwide service which provides a Guaranteed delivery by
f
Global Prieeky Airmail for Parcelforce Worldwide account holders
Global Value A Parcelforce Worldwide airmail delivery service
Grapevine isa FREE service provided by Post Office Security to those working
‘Grapevine within Post Office branches, to keep them updated on criminal activity in their
area
HMAC Her Majesty's Revenue & [Government body that checks that Post Office Limited complies with anti
Customs. Imoney laundering regulations.
WoL Tlorzon Ontne same for the system sofiware which is permanently connected to our servers
Horizon Name of the system (equipment, software and processes) used at the post ©
lotfice counters.
[An integral facility within the Horizon system which aliows individuals to find
HOL (Horizon) Help Horizon Online Help land also print post office instructions on products and services, which can be
accessed whilst serving a customer.
IThis is the contact centre for branches who need technical help with their
[Horizon equipment: For example if a replacement screen is needed or an
HSH or HSD Norzon Service Helpgesk °F engineer visit needed to fix a technical issue. It's accessed by calling 0845
16011022 and choosing the option for technicat enquiries relating to your
Horizon system including hardware. :
1c information Commissioner's. [Independent public body set up to promote access to official information and
Office [protect personal information.
IPS Identity & Passport Service
ns Interactive Recruitment IThe database we use for advertising and also applying for any Royal Mail
information System Group job vacancies. This can be accessed from internal and external websites.
A ENR a ‘or Lig ‘savings account where a certain amount can be invested within eachI
[An optional extra product offered by Royal Mail which allows for a signature
IsF International Signed For _Ion delivery for mails overseas which can also provide compensation if
lost/damaged
IThe term is commonly used as a synonym for computers and computer
T Information Technology —_Inetworks, but tt also includes other information distribution technologies such .
as television and telephones
Keyboard IThe hardware attached to the laptop or as a peripheral item ona PC that
allows for inputs to be made using number or letter keys plus command keys
Losses IA discrepancy showing a iower value between physically counted assets and
ithe expected assets based on sales on Hosizon such as cash/stock etc.
A plastic card with a magnetic strip along the back, which is used as a way of
ic
Magnetic Cards paying bils or saving at the post office
The standards for how customer's mail is kept and separated within the post
Mail
ail Segregation loffice secure area allowing compliance with Royal Mail expectations
Mails Despatch [The time at which the post person collects the mail from a post office branch
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Appendix 2
Main pO Main Post office [A post office branch which operates under a Mains operating model, These get]
remunerated for the number of transactions they do.
Data received from various streams within the business which allows for
Mi Management information {performance and transactional information to be collated and used for
management decisions
MoneyGram is a service available in branch which enables customers to
MoneyGrammfrecelve receive funds from another individual within the UX and overseas
Moneygram/send [MoneyGram is a Service available in branch which enables customers to send
ey funds to another individual within the UK and overseas
Monitor The scteen of the Horizon equipment
MOP Method of Payment The way in which payment is received for a product or service
MOR Mail Order Returns A way for customers to return goods they have bought online fram Home
Shopping retailers. fe, Next. Postage is usually free at branch.
A term for an ex-Crawn Office that is now ruin by an individual using their own
‘SPO Modified Sub Post Office I s¢7 but offering the original services available when it was a Crown Office.
vi Motor Vehicle Licence _jAterm used fora vehicle or car tax dise
Mystery shopping iso tool used externally by companies to measure quality of
Mystery Shopper service, of compliance with regulation, or to gather specific information about
oducts and services.
The first port of call for post office branches if they have a query or need help.
Itisa Helpline for Branch Staff for all Robbery, Burglary oF major incidents plus
Nasc Network anes SuPPOTt I 4 transaction, navigation queries (e.g. which {cons do! need to select for a
particular product or service) or stock related queries. it's accessed by ringing
0845 6011022.
IAssists in the physical needs of moving/relocating branches. Liaises with alarm
NCA Network Change Advisor I anu safe companies to ensure work is done to standard and timescale
Network [This relates to the Post Office network of approx. 11500 branches. '
[The National Federation of Subpostmasters (NFSP) supports subpostmasters
National Federation of Sub Iand operators across the UK. They are an independent membership
NFSP Postmasters lorganisation with a commercial trading company to help support the retail
businesses of their members.
Pc ent. rT if. i
Nsel National Savings & investment [POs* Office client. We self Premium Bonds on their behalf. Used to be called
‘National Savings'
The actual process of branch changes within the Network, Branches are being
NT Network Transformation remodelied internally, others may be relocating. Funding has been received
ifrom the Government to support this.
wre Network Transformation {This is a term used for the current programme of activity regarding branch
Programme ichanges within the Network using Government funding to support this.
These are postage stamps where the value is not shown. ft may just say 1st
Nv Non Value Indicator _{Class or 2nd Class on the stamp, These stamps can be used at any point inthe
future regardless of actual price increases.
8c Operational Businass Change
OFCOM Office of Communications I ReBulatory body that outlines the standards we must meet when we promote
land sell our Telecoms and Broadband
oic Officer in Charge
ved ridings iss be h di is
ONCH ‘Overnight Cash Holdings I [DETNed from declaring actual cash holdings in Branch on a daly basis at close
lof business
[A gift card pre-loaded with an amount of cash that can be used in high street
One for AllGift cards stores or online as a method of payment
On-site Training [Where an FSA provides training to an operator at their branch.
00H ‘Out of Hours [A stock unit that is used out side the Post Offices core hours
[Counter positions with no glass screen. Secure safes are fitted below the
Open Pian
counter.
PRBA Product & Branch Accounting IAlso know as ‘Chesterfield’ and now called the Finance Service Centre
[Database holding postcode and address details. Used for validating
PAF Postal Address Finder I -ansactions or personal records
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Appendix 1
Parcel Hatch [Away of securely transferring @ parcel from the public side of the counter to
the secure area
Partner Bank: ‘These are High Street banks that allow us to do a range of services on behalf ofI
‘arener banks Ithern to enable customers access to their accounts, usually with no charge.
Password [A word known only to an individual which allows access to private/confidential
systems or documents
These are the basic criteria on which mails kems are sent regerding standards
PAWS Packaving, Address, Weld. Jor acceptance. Is tcorrecty wrapped, is there an acceptable address, does i
corsply with weight and size restrictions?
IA standalone bili payment terminal similar to our competitors (Paypoint,
Payzone), usually situated on the retail side of the branch, that allows
lcustorners to top-up gas cards/electric keys and also pay bills if the Post Office
counter is unavaltable -
Paystation
Name of the Express parcels arm of Royal Mail Group. They deliver to iniand
Pr Parcel Force World Wide I 5.4 international destinations and specialise in guaranteed delivery options.
Commonly used for locations with very small customer numbers & where
PHU Portable Hardware Unit I. on equipment is taken to various locations to provide a service.
[Oid terminalogy referring to the latter sent to an individual stating that they
PID Personal Invitation Document Icould fetch their Post Office Card Account card from their local branch - Now
referred to as PUN (Pick-Up Notice)
[Personally known number which allows the user access to
5 ,
PIN ‘ersonel Invitation NUMBe® I racessesftransactions. le, Cash withdrawal using a Chip & PIN card
[The devise, usually on the public counter that allows for entry of the PIN by
Pin Pad
nf the customer
The method used by Royal Mail to charge on size ard weight basis rather than
PIP Pricing in Proportion weigh alone. .
Plastic template used in branches to measure the size of letters and small
PIP Template parcels to determine which price structure to use.
Rarely used ‘shortcut’ key on the Horizon keyboard, Every transaction has an
jatlocated product number which, if knawn, can be typed inte the Horizon
system. In practice this is not used as we have icons displaying the actual
[transaction which are easily accessible.
PLU Product Look Up
IA basic account that allows for the Department of Work and Pensions to pay
POCA Post Office Card Account jan individuals benefits, Nobody else can pay in and the account holder can
lonly take cash out. No interest received on the account .
[This is a payment, subject to a maximum value as authorised, that may be
made to a Post Office Card Account customer during an emergency situation
Jand must be authorised in advance of the transaction. The branch would ring
10845 6011022 and choose the option for authorising emergency POCA
payment.
POCA emergency
payment
This i the contact centre for customers to calif they have an enquiry about
e
POEK ost Office External Contact. 1p. ovvice Products or Services and availabilty, to make a complaint orto
Contee pass on thanks and recognition. The number is G8457 223348
The range of savings and insurance products we have which are sold in branch,
POFS Post Office Financial Services Jonline or by post. Products are done in conjunction with Bank of Ireland as a
[general rule.
an Joint venture between Post Office Ltd and Bank of ireland which manages
POFTS Post Office Financial Travel Ir, ancial products offering travel money, travellers cheques and the Travel
Services
Money Card
Part of Royal Mail Group wholly owned by the Government. Responsible for
POL Past Office Limited
e maintaining the number of Post Office branches in the UK
IA post office branch with a Local operating model contract. These are r
jaeneratly smatier branches with a large retail side which have the Horizon
it
PO Local Post office Local system next to their retail til They offer a slightly smaller product range for
lease of transactions.
Pos Point of Sale Leaflets and posters in branch identifying our products and services
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Appendix 1
IA self adhesive label that is produced by Horizon showing the value of the
Postage Labels postage required on a mails item. These have replaced stamps as a general
rule as they allow for faster processing at the counter and with Roya! Mail
[A printed document similar to a cheque but processed and owned by Post
office Ltd. Can be made for any value up to £250 and is a guaranteed funds
document. Payable into a bank account or potential to be encashed in a Post
Office branch,
Postat Order
[A service/pricing structure for sending mail abroad. Criteria means only certainI
Pris Pi
inted Papers items can be sent this way. le. Books, magazines.
PSA Performance Standards JA document used during training to support clear learning path,
Public Switched Telephone
TN
Ps Network
psB Premium Saving Bonds IAn investment opportunity from Nationat Savings & Investment Product which
we sell on behalf of
PSU Power Supply Unit
[A document that @ customer needs to be in receipt of, enabling them to
PUN, k-
¥ Pickup Notice collect their Post Office Card Account card from a branch
Rates Board [An Electronic Board displaying dally foreign currency rates, usually in larger
branches and visible from the outside of the. building _
REM Remit " IA consignment to or from a Branch of Cash, Stock or other values to be
brought to account
tenn Remittencein fecorcng ‘the movements of items into a Stock Unit/ Branch (Cash and value
Remout Remittance out Recording the movements of Rems out ofa Stock Unit/ Branch (Cash and
value stock)
This is how an Agent gets paid from Post Office (td. it is based on a product
Remuneration payment for each transaction they do and differs from one transaction to the
next
Restrictions Poticy A list of transactions that is restricted within 3 Post Office branch
Reversal The act of taking out a transaction that has heen done previously on the
versal Horizon system. Often used to correct errors.
RM Romi Mall [Subsidiary of Royal mail Group - responsible for delivery and collection of mail
lwithin the UK.
[A plastic card from Royal Mail, issued to business customers after vetting
procedures are completed, which allows and authorises the purchase of large
RM Authority Card [volumes of postage stamps where the business wishes to pay by cheque. The
[card has the business details on and is used as a guarantee that the cheque '
[will be honoured (not bounce)
This is a Royal Mail contact centre for all personal and business customer
RMCS Royal Mail Customer Service enquiries. Personal Enquiries are made on 08457 740 740 and Business
Enquiries are made on 08457 950 950.
IThe managing company overseeing: Royal Mail, Post Office Ltd., Parcelforce,
RG Royal Mail Group Iand Generat Logistics Systems (GLS). Uk's largest employer
RM Royal Mail Letters i
mmso Raval MallSpecial Bevery [A 2ecure Rent day delivery ofered by Royal mallgving priory handling and &
guaranteed delivery window of either by Sam or ipm.
Royal Mail Engineering {Outsourced facilities management for RMG (id cards, clock setting, cleaning,
ROMEC Construction alarm maintenance etc} :
[A stamp that can be used to pay for a Royal Mail signed for service where the
RSF Stamps Recorded Signed For Stamps Iisa §j 4 basic weight etter/erge letter “
[An individual who looks after # number of branches within a geographical area
RSM Regional Sales Manager _Iand gives sales support to those branches through coaching and delivering
jworkshops
ASP Retail Service Point
[An individual whose responsibility isto the NT converted branches ensuring
SCM Sales Capability Manager _Icompliant and correct sales conversations are in place. Generally for a short
time period of up to 2 months.
[One positioned branch. Could be open pian or fortress based (behind glass
sco Single Counter Office
screen)
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Appendix 1
[An area within the post office where cash, stock and mails Rerns are kept. NO
Secure Area
access allowed to the general public
Seite conta Removes the amount from the Branch accounts into a holding account at
y P&BA, Chestestield
[A metal date stamp that self inks in between stamping used for validating
sips Seif Inking Date Stamp Ieransactions showing location and date
- [A Travel insurance policy which covers one defined period of time as needed
Single Trip Policy Iby the customer.
‘Small Parcef IA term used in conjunction with sending mail, up to a certain size.
“Standard Operational
soP Procedure
‘SORN Statutory off Road Notification I informs the DVLA that the owner of a vehicle is taking it off the road
PMA sub postmaster FFraditional name for the individual who owns a branch, Other terminology -
JAgent or Operator
PSO Scale Payment Sub Office I Refers to the type of branch and which contract they are on.
The process of making a formal and complete statement of the physical Stamp .
Stamp Dec Stamp Declaration holdings within the till, usually done when completing the balance.
Stamp Portfolio Stamp Book [A book that holds loose stamps
fi fice is i Pe .
Stockon Hand list of al stock the office ls holding excluding cash (Postal Orders, stamps,
tax discs etc)
[A tite given to an account which halds a particular amount of cash and stock,
su Stock tinit Most branches use one stock unit and identifier, normally AA, but some larger
5 branches have multiple stock units and are allocated to individuals for greater
responsibility/security e
sve Stamp Vending Machine
‘Swipe Card IA magnetic card sometimes used for paying hills
iti is the ind the product lini
Tec Terms & Conditions [definition in wards between the consumer and the product owner outlining
standards
Offered by Royal Mail or Parcelforce Worldwide for certain products which
ar Tr Trae
ar rack & Trace allows online/call centre tracking and confirmation of delivery for mails items
ws Transaction Acknowledgments I” €l#etonke confirmation of certain transactions based on transaction data -
from external clients which is sent to a branch for them to process
An electronic accounting adjustment issued by Finance Services Centre
T's ‘Transaction Corrections _IChesterfield which corrects previous errors in branch. This has an impact on
the branch balance and would cause # discrepancy for the vatue issued. .
TOL Time Delay Lock Compartment
IA card that is available in branch or online in certain currencies which allows
for 2 prepaid value of currency to be loaded. Can be used as a Mastercard to o-
™c Travel Money Card —_I pay for products, primarily abroad, and also able to withdraw cash from ATM's
Jabroad. They have the security of a chip & pin and the convenience of a debit
ard but are not actually linked to a bank account.
Top Up the process of adding credit to a pre-paid card, typically mobile phones
rer Trading Period (Branch Trading [A period of time where at the end a branch must do a monthly balance.
Period) Usually 12 periods in a year, depending on the number of fiscal weeks.
IA report which attaws for Horizon to be interrogated and produce transaction
i
Transaction Log land events processed in the fast 42 days
ar ction Re
ransaction Reference IAn individual reference number generated for each transaction
Number
Travellers Cheques A form of currency to be used when travelling
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Appendix 1
[The process of going through and declaring all cash plus stock in hand, as per
Balance Report, and producing the report. A trial balance shows the user the
[current state of the balance but as i Is only in ‘trial’ format, it allows for the
activity to be cancelled without committing figures.
Fria! Balance
‘United Kingdom Borders
UKBA
Agency
[Security elements which are only visible under a UV fight, used mainly on bank
notes, driving ficences and passports
The process of selling more of the same item to the customer, le. Ifa customerI
lasks for 10 stumps, the clerk should offer them a book of 12
[A logon access cade which is identifiable to the individual based on a standard
User Name format. This is to enable usage of the Horizon system whilst stilt being
[compliant and accountable
[Allows employees to securely access their company's intranet while traveling
Ultra Violet Feature:
Up Seit
ven Virtual Private Network
a ries MONON _loutside the office
VR Voluntary Redundancy I Whereby staff voluntarily feave the business in exchange for agreed terms.
Watermark [A faint design made in some paper during manufacture that is visible when
held against the light
was WH smith Post office branch services are now located in many high street WH Smith's.
They have roughly 70 branches across the country, mainly ex Crown Offices
Tes This ts @ regular training session which many branches and Post Office Lid
WILL Work Time listening and sternal teams use to cascade information and receive feedback from team
learning
members,
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Appendix 2
ist of
Service Availability Description of service
Government Services
Post Office Card All branches A basic account for customers who are in receipt of
Account state pensions, benefits & tax credits and who do not
have a UK bank or building saciety account.
Payments are made into the account by the paying
department and customers can withdraw cash at all
Post Office branches or the Post Office cash machine
network.
Local councif services Local Area based Services on behalf of over 300 locai councils covering
a wide range of applications and payment services
both from and to residents and customers. Services
include cash collection from residents for rents, rates,
council tax, parking fines and licence fees, payment
‘services including asylum seekers allowances, and
rebates, form checking including benefits, planning °
and concessionary travel applications and identity
checking and verification services.
Car Tax — Motor Vehicle I 4,600 branches Car Tax - Motor Vehicle Licence and Statutory Off
Licance tssue Road Notification (SORN) services provided.
Customers can have their documents checked and
get their licence at issuing Post Office branches
nationwide.
Driving Licence photo 750 branches Allows photo cards to be renewed and makes sure -
card renewal the photo card renewal application meets DVLA
requirements by taking a photo to the required DVLA
standards, ensuring that the application is error free,
capturing an electronic signature and sending the
application electronically and securely to the DVLA.
International driving Selected branches Applications can be made in selected branches for an
permit Intemational Driving Permit which is required to drive
legally in many places overseas alongside a UK
driving licence.
Passport Check & Send I 2,500 branches Customers can take their passport applications to a
Post Office where the application form and
documentation are checked to ensure that everything
is correct. The application is then despatched by
Royal Mail Special Delivery priority processing. :
Identity checking Selected branches Customers who need to have photocopies of identity
services documents certified (for example when applying for a
mortgage, bank account or new job), can have
original documents checked and photocopies certified
at the Post Office.
Biometric Residence Selected branches Customers who need to apply to stay in the UK who
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Permit Application for are from outside the European Economic Area (EEA)
the Home Office may need to apply for a Biometric Residence Permit
and can do so at selected Post Office branches if they
receive an invitation letter from the Home Office. The
Post Office captures the customer's biometric details
by taking their photograph, fingerprints and digital
signature and sends the information securely to the
Home Office.
CQC - CRB registration I Selected branches The Care Quality Commission (CQC) is the
service independent regulator of all heaith and social care
services in England. Customers who need a Criminal
Records Bureau (CRB) check from the CQC can get
their application checked at the Post Office to verify
their identity.
Rod fishing and game I All branches based I A range of rod ticences available for angling in
licences ‘on demand England and Wales and game licences to hunt game
are stocked in branches where there is local demand.
Fishing licences are available in England and Wales
only. Game licences are available in Scotland and
Northem treland only. '
Financial services
Personal banking All branches Free over-the-counter cash withdrawals, cashing of
personal cheques, cash deposits or cheque deposits
(the latter in most cases) for partner banks, e.g. Bank
of Ireland, Bank of Scotland, Barclays, cahoot,
Clydesdale Bank, First Direct, First Trust, Halifax,
HSBC, Lioyds TSB, Nationwide, NatWest, Northem
Bank, Santander, Smile, The Co-operative Bank,
Royal Bank of Scotland, Ulster & Yorkshire Bank.
Business banking All branches Business banking services available in branch on
behalf of Santander, Co-operative, Bank of Ireland,
Barclays-and Clydesdale.
Cash machines Over 2,000 locations I Over 2,000 free-to-use cash machines are available
nationwide at Post Office branches nationwide.
Bureau de Change Ail branches Awide range of commission free currencies and
American Express travellers cheques, 1.600branches
offer a range of currencies on demand. An additional
2,500 branches offer Euro and Dollars on demand, a
further 3,436 offer Euros on demand as well as
Turkish Lira in the Summer. An additional 4,500
branches offer Euros on demand either in branch or
online. Currencies can be pre-ordered for collection at
any branch.
Travel insurance Ail branches Ail branches and available on demand in 9,000
branches and via phone.
Travel Money Card Selected branches The Post Office Travel Money Card is available in
three currencies - Euro, US Dollar and Sterling — it is
a pre-paid card that customers can ioad with
currency. It can be topped up at selected branches or
over the phone.
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Moneygram All branches: international money transfer of up to £6,000 to over
150 countries.
Automated bill All branches Acceptance of payment and pre-payment towards a
payments, variety of bills including gas, electricity, water, phone,
council rent, mail order and insurance. (Some
schemes available on an area basis as agreed with
local authonties.)
I PayStation and All branches To charge electric keys, Quantum Gas Cards, E-pay
charging of electricity Transactions. (Stocks of electricity tokens for meters
smart cards are also available in selected branches based on local
schemes.)
Mortgages Selected branches & I A range of mortgages are available including fixed
online rate mortgages and tracker mortgages.
ISA All branches The Post Office offers a fixed rate and variable rate
ISA: applications by phone, post or at the Post Office.
A junior ISA is also available which is a stocks and
shares Junior SA: applications on-line or by phone.
Growth Bonds j all branches Fixed term bond product offering 1, 2 & 3 yr terms.
Apply by post, phone or at the Post Office.
Reward Saver All branches Variable interest rate product with a bonus for the first
12 months. Apply by post, phone or at the Post Office.
} instant Saver All branches Easy access variable rate product with a bonus for
the first 12 months. Available across over60,000 LINK
cash machines. Apply by phone, post or at the Post
Office.
NS&I Premium Bonds I All branches Premium Bonds are an investment where, instead of
i interest payments, investors have the chance to win
tax-free prizes. When someone invests in Premium
Bonds they are allocated a series of numbers, one for
each £1 invested. Minimum purchase is £100.
Customers can hold up to £30k. Apply by phone, at a .
Post Office branch or online.
Mail Services
UK Parcels Guaranteed I All branches Guaranteed UK Parcel services for next day
deliveries:
~ Royal Mail Speciai Delivery Guaranteed by S9am®
~ Royal Mail Special Delivery Guaranteed by 1pm®
- Parcelforce Worldwide express24 ’
- Parcelforce Worldwide express, (availabie in
selected branches), express10 and express AM
UK Parcels Confirmed I All branches Confirmed UK parcel services:
- Royal Mail Signed For® 1st Clase
- Royal Mail Signed For® 2nd Class
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~ Parcelforce Worldwide express48
UK Parcels Standard All branches Standard UK parcel services are reliable and easy to
use and offer a range of delivery options for non-
valuable items:
- Royal Mail 1st Class
~ Royal Mail 2nd Class
- Parcelforce Worldwide express48
international Parcels Selected branches Guaranteed international parcel services for
Guaranteed internationat parcel delivery,
with the added security of end-to-end tracking and
online confirmation of delivery:
~ Parcelforce Worldwide globalexpress
- Parcelforce Worldwide globalpriority
Intemational Parcels All branches. Confirmed international parcel services with tracking
Confirmed or signature on delivery:
- Royal Mail Airsure®
- Royal Mail Intemational Signed For®
Intemational Parcels All branches Standard International parcel services:
Standard - Royal Mail Airmait
~ Royal Mail Surface Mail
- Parcelforce Worldwide globalvaiue(available in
selected branches)
- Parcelforce Worldwide globaleconomy(available in
selected branches)
Drop & Go All branches Drop & Go ~ a free, fast-track service, aimed at Smali
Businesses, intemet sellers and customers sending I
regular amounts of mail. Uses a prepaid card, and I
helps speed up the branch journey for these
customers,
Additional postage All branches: Articles for the blind, HM Forces letters (British Forces
services Post Office) etc.
Philatelic Selected branches Royal Mail special issue stamps and associated
products, such as presentation packs and first day
covers (stocked based on demand).
Local Collect
9,771 branches Undelivered postal items are taken to the nearest
participating Post Office by the postal delivery staff for
later collection or customer has opted for the
collection at their local Post Office branch.
Redirection All branches Mail redirection service for customers who are moving
home.
Telephony
Home Phone All branches The Post Office phone service offers customers line
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in rental and calls. Application process at Post Office
I ‘branches, online or by telephone.
Broadband Essential All branches Capped usage broadband service available
with Home Phone nationwide, minimum 12-month contract. Application
process at Post Office branches, online or by woe
telephone.
Broadband Premium All branches Unlimited usage broadband service, wireless router,
with Home Phone available coverage. Application process at Post Office
branches, online or by phone.
Phone cards All branches UK International calling card offering calls to national
and international destinations.
Mobile E top-ups All branches Top-up service for ali pre-pay mobile providers
through Horizon and PayStation.
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#38.1
Metadata
[Filename 16.19 Briefing Report Part_{(1).pdt [ORIGINAL I
POL00090358
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21 August 2014
Initial Complaint Review and Mediation Scheme
BRIEFING REPORT - PART TWO
PREPARED BY
SECOND SIGHT
This Report and accompanying documents are confidential and are not to be
disclosed to any person other than a person involved in the processing of
Applicants’ claims through the Scheme
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introduction
1.1. This Report has been prepared by Second Sight, which is the trading name of Secand Sight
Support Services Limited, the company appointed to conduct an independent investigation
into a number of matters raised by Subpostmasters, or former Subpostmasters.
1.2. Part One of our Briefing Report (Part One), issued on 25 July 2014, describes some aspects of
Post Office branch operating procedures and related functions of the Horizon system and
makes reference to this Part Two of our Briefing Report.
1.3. This Report expands on the main common ‘Thematic Issues’ that have been raised by many
Subpostmasters in their applications to the Mediation Scheme (the Scheme). This has been
done in the interests of efficiency and in order to avoid duplication across many cases.
1.4. The Report structure follows a modular approach with each Thematic Issue, as broadly defined
by Second Sight, forming a separate section within the Report. There are some topics on
which further enquiries and investigations by both Post Office and Second Sight are continuing,
which when finalised may be included in future updates to this Report.
1.5. This ‘Part Two! Report is therefore a ‘living document' that will be periodically updated as we
develop better evidenced views on each of the matters raised.
1.6, The number of occurrences of each Thematic Issue, from the total population of 150
applications to the Scheme, is indicated throughout this Report using the following groupings
and descriptions:
Few — Less than 15 instances
Many Setween 15 and 70 instances
Most More than 70 instances
1.7. In this context, the most commonly reported issue (complaints about Training and Support)
has been raised by over 130 Applicants, while the least-reported issues (concerns about
Pensions and Allowances transactions and Motor Vehicle Licences) were each raised by only
13 Applicants.
1.8. In order to put our comments in context, the issues being considered are based on concerns
raised by 150 Scheme Applicants from a total population of approximately 11,500 Branches,
1.9. The identification of a Thematic Issue occurs at the time that a Case Questionnaire Response
(CQR) is initially considered by us. As the Scheme process continues the underlying concerns
are further explored and conclusions are set out in the Post Office Investigation Report (POIR)
and then in our Case Review Report (CRR). This Report describes Thematic Issues in more
detail.
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1.10. Comments on a draft of this Report have been provided by Post Office and by the Justice For
Subpostmasters Alliance (JFSA), and we have taken account of those comments when finalising
it.
1.11. In considering the CQRs submitted to us, the seven year Data Retention Policy of Post Office
has in some cases limited the availability of evidential data. This Policy applies to both Horizon
transactional data (held by Fujitsu) and also to other business records such as emails, letters,
memos, interview recordings, transcripts and Audit and Investigation Reports.
1.12. Until recently, Post Office did not appear to operate a ‘litigation hold’ process whereby
documents that may be needed to support a complaint or investigation are preserved —
irrespective of the seven year retention period.
2. Process
2.1. Scheme Application Forms and CQRs included a section asking what were the Applicant’s main
issues of concern. As the Scheme progressed it became clear that some issues were being
raised by multiple Applicants, We listed the seventeen most commonly described Thematic
issues and then referred to these throughout the rest of the process.
3, Scope
3.1, The definition of Horizon for the purposes of our work was considered in our Interim Report of
July 2013 as follows:
“a. the name Horizon relates to the entire application. This encompasses the software, both
bespoke and software packages, the computer hardware and communications equipment
installed in branch and the central data centres. it includes the software used to control and
monitor the systems. in addition..... testing and training systems are also referred to as
Horizon“. :
Whilst we have adopted this Post Office definition of Horizon, it has been necessary to extend
it soas to properly include the totality of the Applicant's experience of using Horizon. We have
therefore found it necessary to also consider issues such as the Audit and investigative
processes and the Contract between Post Office and Subpostmasters.
4, The Contract between Post Office and Subpostmasters
4.1. This section deals with two separate issues. First, the potential impact on Subpostmasters of
some of the terms and conditions set out in the Contract and secondly, issues relating to the
notification to Subpostmasters of the terms of the Contract.
4.2. The following extracts are taken from the ‘Standard Contract’ (dated September 1994) between
Post Office and Subpostmasters. This is a 114-page document, that now incorporates several
post-1994 amendments. A copy of the entire document is available on request.
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43.
44.
45.
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The Standard Contract is described by Post Office as an arms-length, commercial transaction in
the nature of an agency contract.
The contract allocates several financial and other risks to Subpostmasters who may not have
understood or appreciated those risks, particularly if they failed to seek Independent legal advice
before taking up thelr post. Our comments on the clauses most relevant to our Review are
made solely from a business perspective.
The Standard Contract spells out the rights and responsibilities of both Post Office and
Subpostmasters. The clauses most frequently referred to by Applicants are as follows:
a) Section 17: (in the November 2002 amendment) lists the Key Products and Services
{also referred to as the core products and services).
b) Section 15: (in the November 2002 amendment) refers to responsibility for the training
of the Subpostmaster and, in turn, of the staff employed ina branch. Under this
section the Post Office undertakes to provide the Subpostmaster with relevant training
materials and processes to carry out the required training of his Assistants on the Post
Office Products and Services... and the Sub-Postmaster accepts the responsibility to
ensure the proper deployment within his Post Office branch of any materials and
processes provided by Post Office Ltd and to ensure that his Assistants receive all the
training which is necessary in order to be able to properly provide the Post Office
Products and Services and to perform any other tasks required in connection with the
operation of the Post Office branch.
Also... Post Office Ltd may request from time to time that where it has obligations as
described above the Subpostmaster should conduct specific training (whether through
written/distance learning that may require confirmation of completion or via
presentations) in relation to certain Post Office Services (such as, but not limited to,
money laundering). Failure by the Subpostmaster to arrange for such training to be
properly applied will be deemed to be a breach of this Contract by him.
c) Section 1, paragraph 10: requires three months notice of contract termination fram
the Subpostmaster to Post Office and allows Post Office to:
Terminate o Subpostmaster’s contract at any time in case of Breach of Condition by the
Subpostmaster, or non-performance of his obligation or non-provision of Post Office
Services, but otherwise may be determined by Post Office on not less than three
months notice.
In section 12 of the Standard Contract there are a number of paragraphs, as set out
below, addressing responsibility for losses and shortages. These paragraphs are at the
heart of nearly all of the cases being considered in the Scheme.
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d) Section 12, paragraph 12:
The Subpostmaster is responsible for all losses caused through his own negligence,
carelessness or error, and also for losses of all kinds caused by his Assistants.
Deficiencies due to such lasses must be made good without delay.
e€) Section 12, paragraph 13:
The financial responsibility of the Subpostmaster does not cease when he relinquishes
his appointment and he will be required to make good any losses incurred during his
term of office which may subsequently come to light.
f) Section 12, paragraph 14:
Surpluses may be withdrawn provided that any subsequent charge up to the amount
withdrawn is made good immediately.
8) Section 12, paragraph 17:
Subpostmasters may exceptionally not be required to make good the full amount of
certain losses ot his office. if he feels entitled to relief in making good a loss he should
apply to the Retail Network Manager.
h) Section 19, paragraph 12; deals with enquiries by officers of the Post Office
Investigation Division and states that:
The main job of the Investigation Division is to investigate, or help the Police to
investigate, criminal offences against the Post Office, British Telecommunications and
the Department of National Savings. The Investigation Division does NOT enquire into
matters where crime is not suspected.
i} Section 19, paragraph 19: allows persons interviewed by Post Office's Investigators to
have a friend present during the interview but that person may not interrupt in any
way, either by word or signal,
4.6. Having considered the Standard Contract in some detail from a business perspective, we are of
the opinion that it can, in some circumstances, operate to the detriment of the Subpostmaster,
who may not have reviewed nor fully understood the terms before accepting or declining to
enter into the Contract. We have not seen any evidence that Post Office either advises or
requires Subpostmasters to seek independent legal advice before taking up their posts.
4.7. The Standard Contract places a number of financial and other risks with Subpostmasters who
may not have properly understood or appreciated those risks, particularly if they failed to seek
independent legal advice. Consequently, there is a risk that appropriate risk mitigation
measures may not be implemented by the Subpostmaster.
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4.8. We have been told by many Applicants that they were not given a copy of the 114 page
Standard Contract until long after they had committed to purchase their sub-post office, or long
after they had started work as a Subpostmaster, or even at all.
4.9. We are advised that in some cases, a copy of the Standard Contract was not provided to the
Applicant until Post Office commenced litigation. Post Office has stated that its Standard
Operating Procedures require that Subpostmasters are provided with a copy of the Standard
Contract no later than the day that they start work but this often seems not to have happened.
4.10. We understand that it is common practice for a new Subpostmaster to sign an
‘Acknowledgement of Appointment’ letter that refers to the Contract, but without necessarily
being provided with a copy of it. In so doing the Subpostmaster acknowledges receipt and
acceptance of its terms and conditions, without necessarily being aware of its specific
provisions.
4.11. itis worth noting that retaining evidence of the provision of the Standard Contract to the
Applicant has never been part of the Past Office’s Standard Operating Procedures.
5, Automated Teller Machines (ATMs)
5.1. Our Part One Report provides, in sections 5.23 to 5.29, background information an the
installation and operation of Automated Teller Machines (ATMs).
5.2. When a Post Office branch is equipped with an ATM it can be located either within or external
to the branch premises. The installation of an ATM at a branch is often desirable as it can
result in greater footfall and, as a consequence, increased sales of both Post Office products
and services and those of the ca-located shop. Most of the reported problems we have seen
relate ta Bank of Ireland (Bal) ATMs and some to HANCO ATMs. All of the problems we have
seen so far relate to external ATMs.
5.3. Problems with ATMs have been reported in more than 20% of the cases considered so far and
have included both small! and large shortages that were charged back to Subpostmasters by
Post Office. In other cases, large surpluses occurred, which caused concern to some Applicants.
5.4. The normal cash dispensing process on Bol ATMs involves electronic interaction between the
Branch's ATM; Wincor Nixdorf (the service and maintenance pravider); the LINK platform and
the customer's bank. The ATM cash balancing/reconciliation process involves electronic and
also manual interaction between the Branch's ATM; the Branch’s Horizon system; Post Office's
Financial Service Centre (the 'FSC’) and Bol. This is a complex arrangement, requiring greater
human intervention, at the end of each business day, than that typically needed in most high
street banks whose ATMs are seamiessly connected to their awn computer systems.
5.5. One notable problem, reported by many of the Applicants raising concerns about ATMs, seems.
to relate to the manual (rather than electronic/automatic) extraction and use of the ‘cash
dispensed’ figures from the ’Bank Totals‘ receipt that Subpostmasters are required to obtain
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each day from their ATM and their daily input of ‘cash declarations’ into Horizon. This has been
referred to by some Applicants as having to deal with an ‘air gap‘ between their ATM and the
Horizon system.
5.6. In February 2008, Post Office issued an ‘Operations Manual interim’, Post Office stated that it
was issuing new instructions because “a number of non-conformance issues are still affecting
the processes for ATM reconciliation ond settlement and to explain the correct end-to-end
accounting processes relating to Bank of Ireland ATMs” .
5.7. The Introduction to the Operations Manual interim stated:
The Bank of treland, vio the LiNK network, extracts a 16:30 - 16:30 ‘cash dispensed’ figure
automatically from your ATM each day. This figure forms the basis of a settlement to Post
Office. This figure is the value of cash dispensed from your ATM from 16:30 the previous day
until 16:30 on the current working day.
In other words, the amount of cash dispensed to customers, from each branch's ATM during the
previous 24 hours (or during the previous 72 hours between Friday at 16:30 and Monday at
16:30), would be available to Bot and that data would be extracted by Bol from each ATM.
5.8, The Operations Manual interim goes on to say:
{n order to meet the required business accounting standard, branches are required to obtain
each day the 16:30 - 16:30 ‘cash dispensed’ figure from the ‘Bank Totals’ receipt which is
available from the Bank of treland ATM, and to enter this figure on the Horizon system ona
daily basis.
The Manual later describes that as needing to be done each day after 16:30 but before 19:00.
5.9. The Manual continues:
In Product and Branch Accounting (P&BA) a comparison is made between the LINK generated
figure and the figure you enter on Horizon. If the totals differ, they are queried with Bank of
treland and may result in a Transaction Correction sent to your branch. If you do not enter
the daily 16:30 - 16:30 ‘cash dispensed’ figure on Horizon, this means that the settlement
figure by Bonk of trefand cannot be confirmed. In this case the two sets of figures are
automatically reported as differing, resulting in reconcitiation problems.
$.10. In addition to obtaining the cash dispensed figures from their ATM and entering them into
Horizon at the correct time of day, Subpostmasters were also instructed to make a daily cash
declaration (and do this every day including on days when the branch closed before 16:30 hrs)
through their Horizon terminal. Specifically:
You must make a daify cash dectaration on the Horizon system for the separate stock unit
you have set up for ATM transactions (including days when you close before 4.30pm (16:30
hours} and you have logged on to the ATM stock unit}. Unlike cash declarations for your
counter stocks, however, you do not need to make a physical count of the cash contained in
the ATM in order to complete the declaration.
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You must make the declaration before 7pm (19:00 hrs) and you must include all funds stored
in your official safe that you have received on a Remittance specifically for your ATM.
it would appear that some Applicants misunderstoad the instructions, and some were told
by Helpline staff, when they were investigating differences, that "the problem will sort itself
out" (though it did nat}. Any differences would normally be expected ta be resalved by means ~
of Transaction Corrections, however this often meant that further errors were made. Many
Applicants have also reported that they subsequently found that the Helpline's advice was later
countermanded. Comments referring to problems with Helpline advice are found in the CQRs
in nearly every instance where the Applicant experienced problems with an ATM.
A consequence of a user getting things wrong with the ATM cash dispensed figures and
inputting incorrect data and hence causing an initial discrepancy was that an out-of-sync
situation could develop where the branch's ATM would be expected (by Bot and by Post Office)
to have an amount of cash in its cassettes that was different from the cash figure that the
Subpostmaster had entered into Horizon.
Based on comments in many CQRs the problems reported by Applicants relating to this out-
of-sync situation, became, it seems, what can be described as commonpiace in some branches
prior to the February 2008 release of the Manual Update.
The Manual Update confirms that, by following the new instructions, the process for
entering data and balancing ATM cash will change and states:
If following the instructions contained in this workaid means that the way you will now enter
data on Horizon ond balance your ATM cash will change (for example, if you have previously
entered figures which are not based upon the 16:30 - 16:30 figures or if you have not
completed this task daily, moving to the correct process is likely to result in a cash balancing
difference).
If this is the cose, P&BA will issue a Transaction Correctian, to address the cash balancing
differences, and will try to provide clear evidence and as much information as possible to
help with correcting transactions, The correction assumes that all previous ATM dispensed
figures have been recorded on Horizon accurately and that branch cash hos been correctly
declared,
Many Applicants have commented on their view of the complexity of the processing of ATM
figures in Horizon and the general lack of clarity and hence ease of use of the guidance and
instructions issued by Post Office. We consider that the February 2008 instructions represent a
good example of this complexity and show how easy it might have been for some
Subpostmasters to make mistakes. This is an extract from the paragraph titled Loading cash
into the ATM:
Always enter in the ATM the number of notes loaded in the machine, not the value
Ensure that you enter the number of notes you are loading, not the amount already in the
ATM
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Please remember: At the weekly balance all figures are cleared. Therefore, you will need to
enter all amounts in total when you reload the machine next.
5.16. As an additional example, the following extract is from the paragraphs dealing with Weekly
balancing and recording figures on the Cash Management Sheet:
You must make a physical count of the cash in your ATM at least once a week and record the
figures on the Cash Management Sheet before removing the cassettes for your physical
check of the cash. You must not enter any of the figures on the Horizon system. The weekly
balance can be carried out on any day of the week, even at the end of a Branch Trading
period as long as your premises are closed to the public. it should be completed at any time
after 16:30 hrs when the Disp 16:30 ~ 16:30 figure hos been entered.
Please note: You do not have to reconcile the cash in your ATM with the cash declaration you
make on Horizon. The ATM is balanced using the Cash Management Sheet as described
below. ff the Cash Management Sheet balances, your ATM has balanced.
5.17. _... and the following extract is from the paragraphs dealing with /f the Cash Management
Sheet balances, but there is a discrepancy on Horizon:
The Horizon system should not be recording a discrepancy in the ATM stock. if o discrepancy
is not rectified, it will give you a wrong carried forward figure and the problem could be
compounded. If there is a discrepancy on Horizon but the Cash Management Sheet balances,
you could have entered incorrect figures an the Horizon system.
Go back through your receipts and double check that the 16.30-16.30 ‘cash dispensed’
figures for each day have been entered correctly on Horizon.
Check that any ATM cash originally remitted into a counter stock has been transferred into
the ATM stock
Check that the transfer into the ATM stock has been accepted
Double check that the daily cash declaration has been completed accurately
If you cannot resolve the discrepancy, do not phone the Wincor Helpdesk; please phone the
NSC for advice.
5.18. in those cases in which the Applicant reported concerns about an out-of sync situation most
have stated that they had no idea what was causing the problem. The 2008 Manual Update did
little to resolve those issues. Furthermore, if the branch's ATM was operating after the 16:30
Bol 'cut-off' time during the week and/or at weekends (as would clearly be the case with
externally located ATMs), then the transaction volumes and associated accounting entries on
the following Monday would include all cash dispensed in the preceding 72 hours between
16:31 on the previous Friday afternoon and 16:30 on that afternoon,
5.19. We have also been told that when ATM-related reconciliation and out-of-sync problems
were reported to the Helpline, Applicants were often told to ignore the shortfall because it will
Sort itself out. The advice from the Helpline, particularly prior to the 2008 Manual update,
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appears to us (based on comments and reactions from Applicants) to have been inadequate or
possibly even misieading. it may also have had the unintended consequence of causing
Applicants to give up trying to understand and resolve problems. This in turn, could have led to
the temptation to falsely account, while waiting for the problem to “sort itself out”.
5.20. I Many Applicants have commented on the apparent impact on their branch's ATM of power -
or telecommunication faitures. Other than recording in some cases the dates and times of such
failures, it was difficult for them to relate those failures to specific deficiencies. It is recognised
that there are standard processes in piace to deal with power cuts and connectivity interrupts
to ensure that data is not lost or corrupted when those events occur. Nonetheless, the need in
such circumstances for an ATM to be re-booted by the Subpostmaster, or for it to be remotely
re-booted by Bol, could in our view, introduce a possible risk of data loss or corruption. Post
Office has given assurances that this cannot happen, and that it never has happened, but some
evidence seemingly contradicts those assurances, so further enquiries on this point are
continuing,
5.21. There have been many reported instances where a cash withdrawal could not be completed
due to a problem occurring during the transaction. We understand that this occurs reasonably
frequently and can be due to a mistake by the customer. Depending on when the problem
arose it is possible for cash that should have been dispensed to the customer to be withheld by
the ATM but the customer's bank account nevertheless debited.
5.22. When cash is dispensed by an ATM, and there is a delay in the customer physically removing
it, the ATM will, after a set period, retain the cash. This is known as a retract.
5.23. In most instances such retracts occur because customers get distracted and walk away
having failed to take the offered notes within the pre-set timeframe {usually 60 seconds). In
such instances, the customer's account will be debited and, in due course, his account will be
re-credited once (if he notices his mistake) he contacts his bank to report what happened.
Those notes should have been found, at the end of that day, in the ATM’s retracts bin’. Ail that
is innocent and not a cause of problems to any Subpostmaster. The more serious aspect of
retract fraud is dealt with below.
5.24, It is possible that some of the large discrepancies reported by Applicants could have
included losses brought about by external theft where sophisticated methodologies had been
deployed (such as retract fraud or the more advanced transaction reversal fraud). The risk and
consequences of this sort of theft/fraud, and the need to thoroughly investigate every apparent
ATM cash shortfall, seems to have been under appreciated.
5.25. We are aware of a project, carried out by Post Office in 2012, to react to increasing retract
fraud but we have been told that no report was produced and we have, as yet, been unable to
check whether any Applicants were held accountable for losses that were, or might have been,
attributable to external ATM fraud/theft.
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6. Motor Vehicle Licences
6.1. Not ail branches are authorised to issue Motor Vehicle Licences (MVL) and only a small number
of Applicants have reported problems with MVL processing. We have seen a small number of
instances of a particular problem, This relates to V11C forms that were misprinted with an
incorrect bar code. This seems to have resulted in Horizon recording the sale of a 12 month tax
disc, when in fact a 6 month tax disc was sold.
6.2. If this error is not immediately noticed at the Horizon terminal, a discrepancy, being the price
difference between the 6 and 12 month MVL Tax Discs, will occur and the Subpostmaster will
later be held accountable for the resultant cash shortfall. In branches issuing large numbers of
MVLs this could become a significant amount.
7. National Lottery
7.1. Not all branches sell Lottery tickets or Lottery Scratch Cards. Where these items are sold, they
are usually sold from the co-located shop’s retail counter, rather than from the Post Office
counter, even though they have to be accounted for using the Horizon terminal at the Post
Office counter.
7.2. There is often a significant difference in the opening hours of the counter in the retall shop and
the shop‘s Post Office counter. The retail counter will therefore be selling Lottery
tickets/Scratch Cards outside the hours when the Horizon system is operating at the Post Office
counter. Since branches are not allowed to sell National Lottery products other than through
the Post Office, each day's ticket sales have to be recorded, the following morning, in Horizon.
Also, before any Lottery Scratch Cards can be sold, they must first be 'Activoted’ on the Camelot
terminal and then ‘Remmed in' to Horizon.
7.3. We have received many reports where Applicants have stated that their branch's Horizon
system would get out-of-sync with the quite separate Camelot system, thereby generating
material surpluses or deficiencies that were eventually corrected by Post Office issuing
Transaction Corrections (TCs) through the Horizon system. The average Lottery-related TC was
approximately £650 and many of these TCs were for amounts that were exactly divisible by
£160, that being the value of a full pack of Scratch Cards.
7.4. Prior to 2012 most discrepancies on Scratch Card activations were caused by Subpostmasters
failing to 'rem in’ activated packs of Scratch Cards to Horizon. In February 2012 Post Office
introduced a system change that finally eliminated the possibilty of synchronisation errors
between the Horizon and Camelot systems.
7.5. These problems appear to have been most serious and frequent between 2005 and February
2010, when Post Office made a significant change to its Standard Operating Procedures. This
reduced the possibility of having packs of inactive Scratch Cards recorded in Horizon or having
activated packs that were not recorded in Horizon.
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We have also been told by Applicants that, before these important procedural improvements
were introduced, inconsistent and sometimes conflicting advice was provided by the Helpline,
which further exacerbated their problems.
Occurrences of the out-of-sync problem appear to have been particularly prevatent in branches
where an associated retail shop sold Lottery tickets late into the evening, after the Post Office
counter had closed. A further complication often occurred on the final Wednesday evening of
the monthly Trading Period when Subpostmasters were required to reconcile the Horizon and
Camelot figures as a priority task on the Thursday morning, rather than at 17:30 on the
Wednesday, but this requirement was not always advised by the Helpline. It is not clear
whether the training and support that Applicants received covered this important point.
8. Training, Support and Supervision
8.1.
8.2.
8.3.
8.4,
8.5.
The nature and extent of training provided by Post Office has developed over the years as
described in our Part One Briefing Report. in our opinion, the training was probably adequate
for people who had reasonable levels of IT skills, numeracy and accuracy, though further
product-specific training, rather than the use of Operating Manuals, was perhaps required for
some Subpostmasters, especially those whose branches delivered a wide range of products and
services,
We have been told by most Applicants that whilst their basic training was probably adequate in
regard to general ‘Business os Usual’ Transaction Processing, it was predominately sales-
focused and weak in regard to End of Day, End of Week and in particular, End of Trading Period, ~
balancing. We have been advised by most Applicants that there was little or no coverage of
how to deal with discrepancies (both surpluses and shortfalls), how to identify the root causes
of recurring problems or how to deal with Transaction Corrections.
Many Applicants have commented that, in the years prior to the installation of the Horizon
computer system, they typically had monthly surpluses of just a few pounds (less than £30
seemed to be the norm) and that they first experienced large discrepancies shortly after the
Horizon system was installed.
Many Applicants have reported that they or their staff only started making serious mistakes
after the new system was launched. This could indicate a lack of understanding of how the
system was meant to operate and be used, which could itself indicate that they had either been
insufficiently trained, that they had been unable to properly train their staff, or that the new
screen-based counter processes had introduced new ways of making mistakes that neither
they, nor anyone in Past Office, was aware of.
We note that the duration of Basic Training has varied widely over the years and is now far
more extensive than it was in 1990 - 2010 (the pertinent period for many of the Applicants).
Post Office refers to the current routine provision of two weeks’ training for Subpostmasters.
Many Applicants have reported in their CQRs that they received fewer than two days’ training
and were simply handed Operating Manuals for self-study and to train their counter staff.
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8.6. Post Office's Trainers, and in some cases Applicants’ Line Managers, do not seem to have been
well regarded by many Applicants and appear to have been considered particularly weak when
dealing with ATMs; Lottery processing; Motor Vehicle Licences; Foreign Currency and other
specialist products,
8.7. Subpostmasters are responsible for training and supervising their own staff and Post Office has
no responsibility to train staff, other than in Crown Offices. Post Office does provide
Subpostmasters with relevant training materials for themselves and their staff, but it does not
operate a quality control function in order to ensure that this further training is properly
delivered. We found that further training for Subpostmasters was predominantly delivered in
response to user demand, rather than being determined by Training Needs Analysis.
8.8, We recognise the complexity of the current product range and question whether a counter
process involving over 170 products, operated by more than 68,000 staff, of vastly differing
levels of intellect, experience, numeracy and attention to detail, can ever be expected to work
well without a fully effective and comprehensive training and support regime.
9, The Helpline
9.1, Many Applicants’ CQRs have included examples where the Post Office's Helpline has failed to
provide worthwhile support when called. The relevant cal! log (when available) often does not
provide sufficient detail about exactly what advice was provided in order for us to form
evidence based conclusions. Specific criticisms include:
a) difficulty in contacting the helpline due to its limited availability;
b) unhelpful, script-based, responses;
¢} many calls, including those seeking help on balancing problems and discrepancies,
were afforded ‘Low Priority’ by the Helpline staff; and
d) instructions received during one cail that are said to have later been countermanded,
sometimes months later, by another.
9.2. A frequently recurring response by the Helpline, relating to shortfalts, is said to have been:
“don't worry about it, it will sort itself out”.
9.3. Many Applicants have reported that problems did not sort themselves out, nor was any
indication given by the Helpline as to how long they should wait before realizing that a problem
that had not sorted itself out would probably not now do so, nor how they were supposed to
balance the books during the intervening period.
10, Limitations in the Transactional ‘Audit Trail’
10.1. Many Applicants have claimed that, whilst acknowledging some errors were caused by their
own mistakes, they were often unable to determine the root causes of discrepancies (both
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shortfalls and surpluses) reported by Horizon, because the underlying transaction data was not
available to them.
10.2. Post Office controls the Horizon infrastructure including back-office accounting and
reporting functions. A consequence of this is that Post Office may hold Subpostmasters
accountable for shortages that they are unable to fully investigate due to a lack of access to
data. A Subpostmaster has very limited options in these circumstances and often has to make
good losses even where the underlying root cause has not been established or understood.
10,3. The concerns fall broadly into three areas:
a) data that isn't available even on the day of the transaction;
b) data that was at first available, but after 42 days (later extended to 60 days following a
system change by Post Office) is no longer available; and
¢) data that isn’t available after suspension.
Data that isn’t available even on the day of the transaction ~™
10.4. Applicants’ concerns principally relate to transaction types where Horizon produces, at the
end of day, only an aggregate amount and volume for that day's transactions. These
transaction types are those where customers have paid for goods or services by Debit or Credit
Card,
10,5. in the event of an end-of-day discrepancy for one of these transaction types, and without
the benefit of a disaggregation of a total amount into its constituent transactional components,
Applicants found it difficult, if not impossible, to identify the individual transaction(s) that
brought about the discrepancy.
10.6. Typically, a Subpostmaster would need to find items:
a) that should have been, but were not, included in the aggregate total; or
b) amounts that had been incorrectly entered, such as £50.00 entered as £500.00, £39.00
entered as £93.00, a withdrawal processed as a deposit; or
¢}) amounts that formed part of the aggregate total, but should not have been included in
that total at all.
10.7. Only by finding those errors and omissions could Subpostmasters begin the process of
correction and loss mitigation, This may sometimes have involved attempting to contact the
relevant customer, but in order to do that they needed not only to identify the incorrect or —
missing transaction, but also to know the name, and perhaps also the address, of the relevant
customer.
10.8. Many Applicants have told us that, prior to the introduction of Horizon, it was easy to do this
since the paper dockets retained to evidence each transaction provided this information. It is
regrettable that the Horizon system does not provide the same functionality as the previous
manual system.
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Data that was at first available, but after 42 days (later extended to 60 days) is no longer
available
10.9. The main concern expressed about data availability, is the need to go back to a previous
period in the event that a Transaction Correction (TC) was issued by Post Office a long time
after the transaction (to which the TC relates) was erroneously input into, or omitted from,
Horizon. TCs are issued for different reasons and different products may be treated in different
ways. If the delay in issuing the TC exceeds 42 days (now 60 days), the Subpostmaster may no
fonger have data readily available with which to respond to the TC and may have no practical
alternative other than to accept it. We have been told that if further data was requested from
Post Office, such requests were often rejected on cost grounds. We are also aware that the
difficulty in printing and examining Horizon's 8cm wide 'till ratls’ was a significant issue in
tocating the transaction(s) that had created discrepancies.
Data that isn’t available after suspension
10.10. Applicants have reported that their ability to investigate transactional discrepancies, or to
defend themselves against allegations made by Post Office, were often thwarted because,
following their suspension (usually on the day of an Audit} they were, as a matter of Post Office
Policy, denied access to the Branch. In many instances we have been advised that Post Office
investigators also removed records, often including personal documents such as diaries in
which Applicants had noted problems that had occurred; to whom they had reported those
problems; what advice and instructions they had received and what had resulted from following
that advice or instructions. Applicants have also reported that, despite their requests, they
never regained access to any of the records they needed to prove their innocence.
11. Transactions not entered by the Subpostmaster or their staff
14.1. Many Applicants have reported that Horizon transactions appeared to have been entered,
or cash or stock balances changed, when the branch was closed and no one had access to any of
the Horizon terminals,
11.2. Post Office has confirmed that it is not, and never has been, possible for anyone to access
Branch data and amend live transactional, cash or stock date without the knowledge of
Subpostmasters or their staff. However, we are aware that certain error recovery and
correction processes can result in transaction reversals that carry the System Identity (ID) of the
branch employee who entered the originating transaction that the system itself is reversing, or
the ID of the employee restarting the system (see ' Transaction Reversals’). We note that this
fails to easily differentiate between entries made by 2 user and those that are system
generated. Enquiries on these matters are continuing.
12. Transaction Reversals
12.1. As mentioned above, a number of Applicants have reported transactions that appear to
have been input when the branch was shut and no one had access to the Horizon terminals.
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12.2. A few Applicants have reported that they had entered an original transaction, but had not
entered the reversal of that transaction. Rather, the Horizon system appeared to have
generated a transaction reversal, without their knowledge or their intervention.
12.3, This matter was also highlighted in a report by Helen Rose, Post Office Security - Fraud
Analyst - dated 12 June, 2013:
"... it is just that ! don't think thot some of the system based correction and adjustment
transactions are clear to us on either credence or ARQ logs.”
“However, my concerns are that we cannot clearly see what has happened on the data
available to us and this in itself moy be misinterpreted when giving evidence and using the
same dato for prosecutions”
12.4, N.B. ‘Credence’ is a Post Office Management information Reporting System and 'ARQ logs' is
a reference to a request for Horizon information archived through the ‘Audit Retrieval Query’
process. Enquiries on this issue are continuing.
13. Cash and Stock Remittances (Rems) in and out of the branch
13.1. Anumber of Applicants have raised issues concerning 'Rems'.
13.2, 'Rems’ are inward and outward remittances of stock or cash (including foreign currency).
Large amounts of cash and stock are routinely sent to and from branches using this process.
Robust procedures are in place to ensure that the process normally operates reliably and that
errors, or theft, are rapidly detected.
13.3. Occasionally however, branches will report that a Rem ‘pouch’ was not received or that it
contained fewer items, or lower value, than the sender claimed. Similarly, Post Office will
sometimes find that a Rem pouch sent by a branch is missing or its content has been overstated
by the branch. Post Office deals with these discrepancies by issuing Transaction Corrections
that show the details of the shortfall or overage. Because such discrepancies relate to physical
items, it is necessary to rely on witness statements and other documentary evidence as to the
exact content of Rem pouches.
13.4, Some Applicants have described instances of foreign currency shipments being accidentally
sent to the wrong branch. We are aware that some of these errors have occurred due to Post
Office's Business Partner for Foreign Currency (First Rate) using an incorrect delivery address.
Clearly, this introduces the possibility that an Applicant might have been held accountable for a
shipment that was never received by his branch.
13.5. Post Office is now carrying out further investigations into this matter.
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14, Missing Cheques
14.1, As with other outward Remittances (see Cash and Stock Remittances (Rems) in and out of
the branch above), branches ‘Rem' to Post Office's main processing centre (in Chesterfield) all
cheques that the branch has taken in each day. These are put together into ‘Stripey' envelopes
and collected by the Royal Mail after each day's cut-off time.
14.2. For almost all of the cheques that Post Office handles each day, everything normally goes
smoothly, but some cheques do get lost or are accidentally spoiled either within the branch or
at Chesterfield, while some envelopes get lost in transit.
14,3. We have also been informed that is possible for cheques to get damaged in Post Office's
cheque processing equipment and therefore not be processed, In such cases, if the cheque is
so badly mutilated as to be unreadable, the possibility arises that a branch might be charged,
through the TC process, for a missing payment even though the cheque had been sent to
Chesterfield, Also, where a customer's cheque ‘bounces’, it will be charged back to the branch
if the branch staff failed to follow Standard Operating Procedures. Post Office has stated that it
will attempt, where possible, to obtain a replacement cheque from the customer.
14.4, Assertions have been made by some Applicants that customers’ cheques (received in
exchange for goods or services rendered at the counter) never cleared and they were held
accountable for the value of those missing cheques. Post Office has told us that there have
been no examples of this occurring and, in due course, Post Office will have an opportunity to
respond to several specific examples cited by Applicants. Enquiries on this matter are
continuing.
14.5, Some Applicants have complained that the TC process was sometimes so slow {in regard to
cheques) that, by the time they had been advised that a cheque had been lost, mutifated or
returned by the paying bank, all chances of mitigating their loss were gone.
14.6. Post Office has confirmed that Subpostmasters will not be held liable for cheques lost in
transit and that, if all required procedures have been correctly followed, they will not be held
liable for cheque-related losses.
15. Pensions and Aliowances
15.1. A few Applicants have reported problems with Pensions and Allowances where Post Office's
Investigators made allegations that they, or their branch employees, had stolen money by
fraudulently manipulating Pension and/or Allowance payments. The allegations were that
amounts had been recorded as having been paid out when they were not (overclaims) or where
Green GIRO cheques or Pension & Allawance dockets had been re-used (reintroductians).
15.2, Post Office has responded to our request for background information to help us better
understand and put into context the fraud that Post Office had alleged was happening in those
branches.
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15.3. Our purpose, in seeking this background information was to clarify how these types of fraud -
may have been perpetrated and how Post Office identified those responsible. We needed to
explore the possibility that Applicants, who had been accused by Post Office of fraud but not
ultimately convicted of it, but who had in some instances been required to repay the allegedly
stolen funds, might have themselves been the innocent victims of a far larger ‘pattern’ of fraud.
15.4. Post Office pointed out that "it only prosecutes cases which merit prosecution and does so
alwoys on lego! advice" and noted that the vast majority of the cases it takes to court involving .
reintroduction fraud, result in successful prosecutions.
15.5. Post Office's response described the way that overclaim and reintroduction fraud can be
perpetrated and how the relatively easy to manipulate dockets have since been replaced by the -
more secure ‘Post Office Card Account’ (POCA) which uses ‘Chip and PIN' technology. However,
Green GIRO cheques are still in use by customers who have lost their POCA cards and by thase
on temporary benefits.
15.6. It is clear that, while overclaims can arise as a result of errors innocently made in a branch
{e.g. by forgetting to remit a voucher), reintroductions involve a positive decision to re-process
a benefit pay-out even though the genuine transaction with the customer has already occurred.
Post Office concedes that reintroductions can happen by accident, but the Subpostmaster
would still be fiable for such errors and it regards multiple reintroductions as being indicative of
fraud.
15.7. Post Office has concluded that no ‘pattern’ of fraud exists, and we will now examine each of
these cases on its merits, Further enquiries on this matter are therefore continuing,
16. Surpluses
16.1. As stated in the section above dealing with The Contract between Post Office and its
Subpostmasters:
“surpluses may be withdrawn provided that ony subsequent charge up to the amount
withdrawn is made good immediately”.
16.2. Post Office defines discrepancies as including both surpluses and deficits. We believe that
the cause of all material discrepancies should be investigated and corrected. This should
include consideration that discrepancies could be caused by the system itself, or by errors
occurring outside of the branch. It is only by doing this that the underlying root cause of the
discrepancy can be established.
16.3, Feedback from Applicants has demonstrated to us that the preliminary investigative
assumption adopted by Post Office appears to be that discrepancies are usually caused by
errors or problems at the counter and or by theft. Post Office's confidence in the Horizon
system remains very high and as such, the system itself will normally be discounted as a source
of error.
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16.4. In inputting data into Horizon it is possibie that errors are made that generate a surplus,
unbeknown to the customer or third party. Another cause of a surplus could be the
underpayment at the counter to a customer, although this is more likely to be detected.
16.5. We understand that although surpluses are expected to be retained by the Subpostmaster it
is possible to hold them in suspense by ‘settling centrally’ so that future shortages and
Transaction Corrections could be offset against them. Many Applicants appear not to have
been aware of this facility.
16.6. The failure to investigate and correct material discrepancies is perhaps unique to Post
Office's Business Model. Unlike commercial entities that do not operate on an agency basis,
Post Office has had little commercial incentive to seek the root causes of discrepancies as the
burden of cost (and risk) is being carried in most instances either by its Subpostmasters, in the
case of shortfalls, or by its customers or Post Office Clients, in the case of surpluses.
17. Cash withdrawals accidentally processed as deposits and other counter-errors that benefit
customers at the expense of the Subpostmaster
Cash withdrawals accidentally processed as deposits
17.1, Mistakes can occur if the counter clerk accidentally touches the 'DEPOSIT' icon on the screen
instead of the adjacent ‘WITHDRAWAL one, thus generating a deficit of twice the size of the
customer's withdrawal. Such errors by branch staff can be difficult to Isolate from the system-
produced totals of card transactions (see Limitations in the Transactional ‘Audit Trail’ above)
unless the customer notices his windfall and then tells the branch about it. Absent such
customer honesty and diligence, shortages brought about by such mistakes are very difficult to
isolate and recover.
Other counter errors that benefit customers at the expense of the Subpostmaster
17.2. We have been made aware of cases where Applicants have been held accountable for
shortages that have arisen through what Post Office refers to as “errors made at the counter”
and where customers have profited at the expense of the Subpostmaster.
17.3, Where a customer has received cash or goods and later discovered that their bank account
has not been debited or their card account has not been charged, it is quite possible that they
may keep quiet about it, leaving the Subpostmaster to be held accountable for the resultant
shortfall.
17.4. In mid-2008 the method of processing receipts into Giro Bank accounts was changed.
Previously, customers completed a two-part paying-in slip, One copy of the paying-in slip was
retained by the customer, another was retained in the branch and cross-referenced to the entry
made on Horizon.
17.5. Prior to the mid-2008 processing change, the Subpostmaster would have been able to
identify the amount of cash that had been recorded in the system by cross-checking with the
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paying-in slip. Hence, a correction could have been actioned and the branch's books brought
back into balance. in such a case, the apparent cash shortage would have been eliminated
because the audit trail enabled the specific cause of the shortage to be identified and corrected.
17.6. However, after the processing change, paying monies into Giro Bank accounts was actioned
via swipe cards and one-part paying in books with no supporting documentation being retained
in branch.
17.7. After that processing change, the counter clerk would swipe the customer's card to access
the account details and then key in the cash deposit. After inputting the deposit, the system
printed out just one copy of a receipt (which specifically states on it "NOT TO BE RETAINED")
and this was then passed back to the customer along with their swipe card.
17.8. It follows that, if the counter clerk did not immediately spot an error, any later balance
would show a difference between the cash holdings on Horizon and the actual cash holdings.
However, after the processing change, there would be no supporting documentation available
either to the Subpostmaster, or to Post Office centrally. Therefore neither the Subpostmaster
nor the Post Office's central processing unit would be able to check whether or not the cash
deposit entries on the system reflected the actual amount of cash that had been deposited.
18. Error and fraud repellency
18.1. Normally, when a business detects errors or fraud occurring repeatedly, investigative and
analytical work will be carried out to determine whether changes to its Standard Operating
Procedures, to its hardware or software, or to its employee training, should be made so as to
reduce the likelihood and/or seriousness of future recurrence. This process of investigation and
analysis generates, over time, a ‘Virtuous Circle‘ of detection, loss mitigation and process
correction/improvement which builds the entire system's robustness and efficiency.
18.2. In not fully investigating "errors made at the counter", even where it is obvious that some of
those errors have been systematically repeated in a branch, or even across the Network, Post
Office seems not to taken ‘ownership’ of finding ways to reduce (or manage) those errors.
18,3, This has led to a situation where Subpostmasters have been bearing the cost of losses
caused by errors and fraud that could possibly have been designed out of the system, or where
improved operational procedures and training could have reduced the incidence and severity of
errors made at the counter.
18.4. A good example is an issue that has been raised by Applicants in regard to Giro transactions.
This relates to Horizon operating in Recovery Mode, for example following power or
telecommunications failures that resulted in the branch terminals freezing. In these situations
the system goes through a complete reboot, then, when it has finally rebooted, a message .
appears on screen asking “do you need to recover any Giro transactions?".
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18.5. A few Applicants have reported, when faced with that question, they usually did not have
sufficient information to know whether or not the system needed to recover any Giro
transactions. If they responded in the affirmative, the system asked for the details of the Giro
transactions that needed to be recovered. As the user did not have the relevant details to hand
{and could not access the data as Horizon was still completing its reboot process), they were
forced into responding in the negative and hoping that was the correct response. This often
resulted in the ‘wrong’ answer being entered and transaction errors being generated.
18.6. The following key question, that arises from the above observations, is:
“Is Horizon fit for purpose?”
18.7, tn trying to answer this difficult question, we recognise that, in the vast majority of cases,
Post Office's Subpostmasters operate their branches year after year with minimal reported
problems. For them, the Horizon system appears to be “fit for purpose".
18.8. References here to ‘the Horizon system’ are mainly focused on ‘Horizon On Line’, which
evolved from the original Horizon application. Our comments encompass not only the system
itself but also supporting processes and procedures. However, some comments received relate
to earlier versions of the system, a number of enhancements having been made following user
experience and feedback.
18.9. For the Horizon system to be considered fully ‘fit for purpose’ for all users it would need to
accurately record and process, with a high degree of error repellency, the full range of products
and services offered by Post Office, whilst providing a clear transaction audit trait allowing easy
investigation of any problems and errors that arise. The cases that we have reviewed
demonstrate that this design objective has not always been achieved although some
improvements do continue to be made.
18.10. A fully effective system would also need to be able to cope with a diverse collection of end
users and operate in areas where power and telecommunications reliability could not be taken
for granted. The cases that we have reviewed show us that errors are more likely to occur
when unusual sets of circumstances and behaviour are present. We have little doubt that
branches with unreliable hardware or poor telecommunication and power supplies, appear to
have suffered a disproportionate incidence of problems.
18.11. We have also come to the conclusion that some of the peaple appointed by Post Office as
Subpostmasters may have been unsuited, from the outset, to the ever-increasing complexity of
funning a computerised branch. These include those who:
a) were relatively (or even in some cases totally) new to using a computer;
b) had insufficient time and knowledge to be able to investigate and resolve shortages
without quality support and assistance; and
c) relied upon staff whom they may have ‘inherited’ from the prior Subpostmaster and
who were either careless, inadequately trained or even dishonest.
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18.12. Where @ person, who was either unsuitable, inexperienced or inadequately trained, was
faced with problems, perhaps associated with hardware or telecommunications failures and the
system's resultant restart and recovery procedures, it was at that moment that an otherwise
repairable situation often turned into a catastrophe. For them, and in those specific
circumstances, Horizon could not be described as “fit for purpose".
19, One-sided transactions
19.1. Many Applicants have raised concerns regarding transactions involving debit or credit cards >
where Horizon has processed a transaction but the corresponding charge to the customer's
bank account appears not to have been processed. In other cases the opposite situation
occurred, where Horizon rejected (or appeared to have rejected) a transaction, but the
corresponding charge to the customer's bank account apparently was processed.
19.2. One possible cause for this might be that telecommunications failures have occasionally
prevented one side of a transaction being processed whereas the other side of it has been
processed properly.
19.3, These transaction processing failures would be less troublesome if they were always
detected, at the counter ideally, or later by additional control and reconciliation processes -
carried out by the Subpostmaster or by Post Office itself.
19.4. itis however not yet clear whether Post Office's in-house (after-the-event) reconciliation
processes can be relied upon to always detect any one-sided transaction that the
Subpostmaster fails to detect.
19.5. Where a customer has been charged for something that he has not received, there is a very
high likelihood that he will detect this (for example if he receives a Final Demand for a bill that
he believes he has paid) and will complain. On the other hand, where the opposite has
happened, and a customer has received cash, or goods, and his bank account has not been
debited or his card account has not been charged, it is perfectly likely that he will be unaware of
his windfall or will simply keep quiet about it, leaving the Subpostmaster to be held accountable
for the resultant shortfall,
19.6. It is important to understand that, where that sort of error occurs, no evidence of it is visible
to the Subpostmaster unless the customer discloses it.
19.7, We have provided Post Office with examples of one-sided transactions and our enquiries on -
this important point are continuing.
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20. Hardware issues
20,1. An examination of the hardware in use in a typical branch reveals that much of the
equipment appears to be quite old. In some cases it was first put in place more than ten years
previously,
20.2. There also seems to be little routine hardware maintenance. Instead, faulty equipment is
replaced as and when needed. This process is referred to as "kit swap outs" and principally
involves the replacement of broken units with reconditioned ones. Reports of several
reconditioned components or units being tried, and failing, before a working one is found, are
not unusual. This is because much of the bespoke equipment used by Horizon is no tonger
manufactured. The most commonly raised issues concern printers, PINpads, touch screens,
telecommunications equipment and base units.
20.3. Many Applicants believe that faulty equipment could be responsible for otherwise
unidentified shortages. Post Office’s position on this is that it cannot happen. Enquiries on this
point are continuing.
21. Post Office Audit Procedures
21.1. In many cases Applicants have told us that they were not given copies of the Audit Reports
relating to their branches and that their enquiries to Post Office, in respect of those Audits,
were never answered.
21.2. Itis clear that Post Office’s current practice is that each Subpostmaster is provided with a
copy of the Audit Report for his branch. We do not know when this current practice was
adopted or whether a similar policy apptied in prior years.
22. Post Office investigations
22.1. As a result of our investigations we have established that Post Office's investigation team
has, in many cases, failed to identify the underlying root cause of shortfalls prior to initiating
civil recovery action or criminal proceedings. This includes cases where Applicants brought to
the Auditors’ or investigators’ attention their own suspicions as to the underlying root causes.
22.2. Many Applicants, and aimost all the Professional Advisors, assert that there was inadequate
investigation prior to suspension (without pay); termination; or civil/criminal action.
22.3. Based on the cases examined so far, Post Office's investigators seem to have defaulted to I
seeking evidence that would support a charge of False Accounting, rather than carrying out an
investigation into the raot cause of any suspected problems. Evidence to support a charge of
False Accounting is often easily obtained since, when confronted during interview with
evidence of obviously over-stated cash figures, the accused person will often readily admit to
falsifying the end of Trading Period Accounts.
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22.4. With the exception of an interview conducted in accordance with the Police and Criminal
Evidence Act (1984) we note that the interviewee is not allowed to be legally represented,
although they may be accompanied by a ‘friend’, albeit with very limited powers.
22.5. Interviews will usually be recorded and, when an admission has been made, this will virtually
always trigger a ‘Guilty’ plea by the defendant and often an associated repayment proposal. As
a result, Post Office investigators seem to have found that recording admissions of False
Accounting was the key to achieving relatively rapid, and (to Post Office) inexpensive, asset
recovery.
22.6. As a consequence of this, Post Office's investigators seem to have de-emphasized the
importance of unearthing the true root causes of the “mysterious shortfalls" that Applicants
claimed to have suffered. Even when faced with requests from Subpostmasters for
investigative help, this has often been refused. Regrettably, this refusal to provide investigative
support is in line with the Standard Contract.
22.7. itis clear from comments made by Applicants, that this was clearly contrary to their
expectations and that they were unaware that, under Section 19, Paragraph 12 of the Standard
Contract, the Post Office investigation Division (POID) does not have a mandate to provide
general investigative support to Subpostmasters.
22.8. Post Office's instructions to (and training of) its Investigators seems to have disregarded the
possibility that the Horizon system could be in any way relevant to their investigations. A
consequence of this flawed approach to investigations is that many opportunities for process
improvements have been missed.
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#211.4
Metadata
Filename 16.20 Briefing Report_Part_Twa(1).pdt LORIGINAL I
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Prow: The Re Hon Janse Arbarhan, MP
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HOUSE OF LOMMONS
LOR DON SWLA BAS
LY September 2014
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#85.4
Metadata
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ORIGMAL I
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Covfiderttiat
Initial Complaint Review and Mediation
Scheme
Reply of Post Office Limited to Second Sight's Briefing Report - Part Two
22 September 2014
This Reply is confidential and is not to be disclosed to any person other than a person
involved in the processing of Applicants’ claims through the Scheme
Cantents
introduction
Tins &
Overview: of Post Office's positien ...
Post Office's response io sector: 4 ~ The Contract betvten Post Gifice and Subpostmastars
Poet Office's response ta section § « Automated Telling Machines {ATMs}...
Post Office's response to section @ - Motor Vehncie Licences ..
Post Offs
resnonse to section 7 - National Lottery
Puck Office's response ta sectien 8 ~ Training, Sunport and Supervisinn
Post Office’s resgunse to section 9 ~ The Helpline...
Post Office's response ta section 40 = Limitations in the Transactional “Audit Trail! oo...
Past Office's respanse ta section 11. - Transactions not entered ty Subpastmaster or their Staif ..
Post Office’s respunse ty section 12 - Transaction Reversals ..
Post Office’s response ts section 23 - Lash and Stock Remittances (Rems) wn and out af the branch .
Pest Offien’s response to section 14 - Cheques.
Post Office’s response ta section 15 ~ Pensions and Allowances...
Float Oifice’s response ta section
Post Difice’s response to nection 1? ~ 0 neht customers.
Subpastma:
1 the expense of the
Pest Office's response ta section
2 - Error and fraud repetiency
Post Office's response to section 29 ~ One- sided transactions...
Post Office's response to section OO - Hardware istues .
Post Office's response te section 21 ~ Post Office Audit Procedures
Pest Office's response ts section 2
>» Post Office Investigations...
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on 68
Gt
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Confidentiat
introduction
aA As part of the Ir
Complaint eview and Meiation Scheme ithe Scheme}, Second Sight is
engaged as a firm of forensic accountants to provide a logical and fully evidence: opinina on
the merits of each Applicants case
QS Or 24 Aagust 2074, Second Sight’s Briefing Report - Part Tves ithe Report} was sent as a
confidential docurnent ta a number of Applicants and their advisars, as well a5 ty Post Office,
The purpose of the Report was to describe and expand an common issues identified by
Second Sight as being raised hy rauitygle Applicants fa thematic issue) The aim being te
provile general information that cauld then be applied in specific nases.
43 Post Office has been unable to endorce the Report. if wrote te recinients of the Repert,
mumediately alter ifs veh setting aut 3 reasons for this and camuviited te set aut t5
detated position an the issues raised mt the Report. In the interests of transparency and with
the overrdbnig arn ségieny the vesoluien of conpla
Office has prepared th
by i ander fo
reformation that the Report amdis.
Léa The body of the Reply srovaies Post Office's detadexd comments ort each section of the Report
There are however a number of ssues that renceur throughout the Regart which are:
summarised belaw,
Lack of thematic issues
as A number of sections im the Report do not identify a thematic issue which could be of general
apgicatinn to reudiple Apylicants as apyesed fo mattens that need to be addressed or & race
by case basis, Where this arises, Fost Office will address those is:
wits cage specific
investigation Regarts.
46 Df the 79 sections in the Report, 9 sections do nat identify a thematic issue namely sections 6,
PAL V2, 23, 24, 15, 19 and 20.
Absence of conciusions
a? The majority of the cases oi the Scheme tue: an there having bean a lacs sn a branch for
ublty, it rust help explant
The Report is largely silent on
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Confidential
thig critical issue As “enmmanes
ads, there are a number of topics in the Report wh:
are on-going A ¢ af ather sechone set cut the competiig views of Applicants and
ice but offer no view on whether either parties’ positian is to he preferred.
18 Of the 10 sections that identify a thernatic issue. b do net reach a canclusian, namely sections.
8.9, 16.47 and 23. 4 fern concksion would have assisted
Seppe
Le The scape of the me is to consizer rnatters
issues’. Matters such as the Subpostmaster contract and other legal matters are not within
the scape of the Scheme and are cutsde Secon Sight’s professional expertise.
fa
ka
oy
The Ragort goas beynad the axnge of the Scheme and Second Sights expertise in cections 4
4S and 22.
Missing eviience
244 The Report tacks in a number of places supporting evidence, source documents, examples or
statistics to substantiate the conclusions it draws. ft does not describe the averarching
the weight of evidence from different saurces - this 1 raast
yeathodglogy used to exanni
inportant where the information nrowded by Applicants is anecdotal and has yet to be
ated and tested.
432 Ai the Gre the Report was completed, Second Si
had investigated 21 cages subrnittad to
the Scheme and completed fi of Review Reports in 10 cases. Second Sight has recerved
seformation from the apprexumately 150 Sppieants te the Scheme, whereas in there.
have he»
ths
mare than 450.000 users of Haron since &s ception mi 2Q01. The Regort is
hased on the te views of only 0.07% of all Horizon users and cannnt therefore
be said to refiect gener:
SEY OXPETIENCE,
4.43 The 2 sections of the Repart that do. in fact, reach findings on thematic isoues within the
s expertise, (sections § and EC) are hoth urfortunstely unaupported by
tested and credible evidence.
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‘This Reply
a2 iis recor ed that the reader farviarises thet Ss with Second Sight’s Briefing Report
~ Part One (the Part One Briefing) which background mfgrmation on Post Office's:
processes and pracedures, Reply Builds on the inforraation in the Part One Bdefing
22 Care should be taken when seeking to anpiy the Renert’s findings and this Reply te indiviual
cages cince the extent to which they may or may nob apply will very rmach depend on th
specific circumstances.
23 ins this Reply
« References to paragraphs and sections are to paragraghs and sectians of the Report
unless stated otherwise.
s “Agplicant® meand an appl
Subpostmasters in general, whether or not they have applied to the Scheme
* For ease ference, where reference is made betow to “Gubpcsimasters” ar
“Applicants” taking actin in a branch, thi
taken by a Subpostraaster’s asuistant,
* Al oth
apitalised terms are defined in the Part One Briefing.
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Confidential
Overview of Post Office's position as
34 Nearly a Agpbcatins to the Scherne centre an there beng a inss of cash fre
the Applicant does not conciter that they caused or are Hable for, The purpose af this Reply
ta help
ntify inose riaues that can cause sch 8 lass and those that carina,
3.2 frerder te entify a ioas af physical cash, an investigator needs twa pieces of key information:
ES How much cash should be in the branch as a result of the transactions processed int
the branch. This infarmaton is provided by the heanch acmnunts stored on Marimn.
b. How much cach (6 ac ine the branch, Thus © keawn by can
scbng 3 physical
courte 2 cash on hand.
3.3 Any difference between the above two figures gen:
‘ates a “dscrepandy” whith misy either be
& shee
ora surplus,
Cuntroifing the branch accounts
34 cash a me
9, the first stage of the investigation is to identify the day an which the cash
went missing. The transactions for that day can ther: be reviewed for anomalies (see section
2G of the Part One Briefing) eg:
actions incorrectly recerded (ouch as withdrawals recurded as deposits}, ones
scorrecly erdered (e.g.
ring £2000
us
we
This 1s done ta deterrame i the branch has made ervors that would make the branch accounts
maccurate. T
remew must be dane hy the Qranch stat ordy they will know the
transactions done on thal day and may recall the correct transachun details. Many branch
errors including the two examples above) are most easily identified in branch. They would
not be evident to Post OF
Post Office det
a Transaction Correction ts a branch netfying them of the error and eo:
acount
a3
R has beer: alleged by sere Applicants that they have heen sued Transact
even wher they were nol at fault, Trassaction Correchons are only issued where there 15.
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Gear eadance of an ervor an branch, Where the cause of foas rests wath Post Office or a third
party chert Post Office absarbs that cost and if @ not pasaed back to branch. This prncipie
underlies, the design of Harizen and all Post Office's hack office aad recanciliation proxsses
Contraiting cash movements
td
& Save wher it conducts ar audit, Pos! 2 Gae5 Not have 3
ay direct knowledge of what
physical cash 1s actually in 3 branch ~ only Suspostmasters have this formation, For this
reasan, bra: 6 are required to:
° Count the amount of cach & branch dady and record this figure on Horizan as 3
cash declaration.
° Count
cash and stock at the end of each thading period and recard these figures on
Horizon before making goad any discrepancies’:
w
wy
Hf daily cash declarations are rot made by @ braich or declarations are made falsely (by
declaring that th there actually is} then it is rreosable for
Post Office, and wilt be very difficult ¢ not impossible for a Subpostmaster te:
« Snow if cash is missing,
* identify the days cn whith cack has gone missmyg:
e identify which member of staff rnay be the coerce of era
* Locate the erroneous transachans that were the cause of a fess.
3.40 Daily ancurate cash deciarations are the mast critical aspect of branch accounting, withaut
ned
winch lasses of cash, ge unch
3.2 Far this reason, if i¢ critical that Subpostrnact rnake accurate daily cach declaratians as 8
furiarnantal requirernent af ther cordract with Post Office. Subpasimasters hatibaally fading
to reake cash declarations may find ther contracts terminated. Post Office aisn prasecutes
these Subpostmasters who dishanestiy make fatse cash declarations. {t is nat an excuse to
Say that a Subpestmasier was puorly tramed or received inadequate aupport in this regard.
cash declarations ss known by all Subpostmasters ard ig easily dane ~ !
veilablel Post,
The need for dai
ig s@ speviaist traning or suppart required lalbait thal bath are prowdded
Office does nat accept that there are any circumstances capable of justitying committing the
crrarai offence of rendering a false
* See saragranh 32 af the Part One Briefing regarding “making good” errors,
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342 tn the contest af the Scheme, there are a number of cases where accurate cash declarations
haye not been made. Many of these Applicants have challenged
n by fs
ast Office to identify the
ne of tosses wt their branches which they had hid
cely accaunting. &s explained
sources of the losses 1s not possible where an Applicant has failed
af making accurate dady cach declarations
Heider:
343 Subpostrnasters are cordractually bable for any
aused by there inaccurate
record heer vhwther due te error, ct
> that ar
mesty or otherwise, 1s also @ well-established
common law gringy syerd (e.g, ¢ Subnostmasterl ic hable te pay & sigal fe.g.
Post
any sur dectared ir apart,
Responsibility for losses
244 A sursher of Applicants have accused Horizon of inaccurately recording the transachand
processed at thelr heanch which they say shows that they were not Gable for ti
their branches, To date Post Office has been provided wath r
ot in the Report of Harzor's failure to record tars
345 The Report tooks te identify thematic points where Second Sug!
he fh
considers that Hormorn may
ad However, these ports are ether di-explaried,
avidenced oF are proven not to
be the cause of iovses in branches.
3.46 Absent any doubt aver the integrity of the branch accounts produced by Hovizan. Post Office
considers it fair to assume that if a josg has occurred then it has been caused in the beanch
shmasters are tia!
3A? Post Glfice remains commiited te fudly and open-nindediy investigating every allegation made
ey
Scheme, 2 hs a: is interes
3 who +
about Harigoc through:
interest of the
well a)
48
¢ Subpastmaster Scheme to dentify an issue if one exists.
@ HOt applied to it
However, Post Office is confident that there ar
yaberc preii
with branch accounting
3 Horizon and all existing auidence avervd
5 position
ingly supports th
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Post Office's response te section 4 - The Cantract between: Past Office ard Subposimasters
at Section é of the Report concerns the contract between Post Office and Subpustmasters dated
1994 tgs rewned over the years} {the Contract). it consiiers (4) the potertisai
impact af some af ing te natificatian of the
Contract terms to Subpostmasters
Ne
An asomsament of the Contcact is outside the scope of the Srherne which was to consider
“Honzen and assaceted issues’ Second Saght has no mandate to consider the Cantract and
the Report cantains a number of statemes
fs that are mcarrect. Second Sight are not taveyers.
but forensic accountants, and any assessment of the Contract can only be undertaken agaist
iegal principles. for this reason, no weight shouid be placed an this section af the Report as &
reflerts oni
43 To help aveid potential contusion, Post Off
&
Contsact below.
Senpact of selected terms and conditions:
as At paragraph 4.5 the Report sets out selacted sectors of the Contyact, Whist these provsions:
do reflect the terms and cormhtinns ay stated vthie the Contract these are selective and rat
reflective of the Contract a5 a whole in addition, the Report does not appeur te take account
s, bookiets and
uch as mari
of other documentation that mmargneaied inte the Contract ¢
operational instructions soued by Post (fice from time to time.
Fawness of the Contrart
oe
Paragraphs 4.4 and 4.6 both make the same canchusiat
the cordractual priwisinns referred io above Gn particular Section 22 requirmg the
Subpostmaster to rake good losses} operate to the detriment of, and are unfair is, &
Subpostaster
66 The Cantract is @ busi vt. Save in a few very narrowly defmed
5 to business arcungern
areas dwhich are ant applicable her re sO genera principle at law of whether the
Contract is “fair” or act The Report makes oa reference te any other sarular agency
agreement or benchmarks that may provide @ view un what is corarman practica. In Post
Of
experience, the terrns of the Contract sre broadiy similar to those used in franchising
arrangements across the UK,
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+
masters are agents and Post Office is their grincipal At iaw, ageriis owe
duties to thelr principals including the duty to act im quad farth, ic render accurate accounts
and ta make quod any losses they cause. Section 12 of the Contract simply reflects these
legai principies.
&& The Corract reflects the basis ae whici
fly conducted bie
Post Office acct thousands af Subp:
is nether carirmercall
legaily unfar, At a cumber of poirds. i ed to “dutins” on Posi (fice that do
ne east in the Contract. i is not now apen tc seek fo retrospectively change the contractual
foundation of the ¢ niship between Post 2 and Subpostmaster, pre
Subpostrnasters’ understanding of the Cantract
Repay iat Subpostiniasters may nat have reviewed or
ty understoad tie
terms before entering the Contract. As a residt, the Report states, at paragraph 4.7, that.
re unable to 9
Subpostna agate “asks” that they raay fame. Peal shoagraas vath
supparted hy any evidence,
ates entered pwaen Fost GF
rid Gubpactraas done so freely
and at arm's length, Ultimately, it is for the Subpostrnasters ta chose whether they enter me
arte
Tontract on nat.
4UL The Report provides no ender
understand th
sorts from a business persgactive Gwhether Past Office or e
Contract ithe
view heme taker in the:
sr} the prowsions are very choar and weitten in piain English,
&
ja
ie]
In any event its 3 legal orincipte that on who agrees to a contract is
bound by its terms even if he does nat have 3 copy of those terms, has not read them oe dk
not underitar:
Poet Oifice cannot be resgonsihie for a Subpostmaster wha may not
have taken the time to read the Contract,
4.13 The Report also notes that Post Office dows nut recammend that Subpestmasters take lega!
advixe There sno obligation on Post Office tp make t mmendaton it is howe
te any Subpostenaster te egal advin
on the
Hieach,
tansy time,
Notification to Subpastmasters of the Cantract terms
414 Paragraphs 48 to 4.11 state that Post Office doxs not provide
a copy of the Coritract to
Subpostmasters. This appears to be based on the fact that a Subpostmaster dees r
40
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Thes does not mean that the Contract
raceiving the Contract or cannet produce a cony nov
was not provided. Given the age of some of the cases in the Scherne, itis not surprisn
recollections are hazy and that some records are nuw not available.
4415 tic
seeking appomtrnent and fram Fost Office's Hurnan Resource Service Centre if they have
Subrestmasters fo reg) copy af the Co braughaut negababons wher
rasstdaced or lost a cogy. Its alco Past Ofice’s standard operating procedure te ensure that
the Subpostrnasters fave a copy of the Contract no later than the day that they cornmence
thelr gestion.
4.46 Paragraph 420 highlights that # iy commen practice for new Subpestniasters to sign ari
“Acknawledgernent of Appointment” without a copy of the Contract. Its
ihat a separate docursent wii te signed rather than the full Contract, As a point of law.
verms and conditions can be incorporated inte a contract by reference to annther decurnent
that is nat aigned.
Ww
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Post Office's response to section § ~ Automated Teller Machines (ATMs}
4S Inewes Cancernmy the accounteeg in branch for ATM
the Regort raises vai
Bi Sect
ne
transactions,
2 The Report does not clarify which precise part af the ATM accounting process is under
aration by Second Sight. ir: broad terms. the accounting process breaks down inte os
consis
three elements,
a. Leading ~ Cach for the ATM is sent te the branch by Post Office and is loaded by the
2 ATM Cash as part of the
into the ATM) Thee requires the recording
branch's stock.
b. Cash dispensed ~ the arnount of cach dissensed by an ATM is recorded daily an Horizon -
sae further bow
«Exceptions ~ rejertes cash and retracted cash ~ see further below,
53 Fram the content of the Report, Post Office believes. that Second Sight has facused grmardy.
on ihe processes far the recording of cash dispensed fram the ATM hawaver other issues are
hed
Bs alse.
$8 in short, nothing in this section af the Report gives ise te any issue that could cause a tons of
atbranch. The Renort does highkght a few areas where Applicants have daimed to
for ATM transac
transactions will, save in a few minor areas {highlighted belawl, not cause a loss to a bra
Chel of syne f alr gay
5.5 ‘The Report focuses on the situation where cash is dispensed from an ATM. The process for
accounting for disnerced cash ss set aut at paragraph 5.27 of the Part One Arefing. In shart,
an a daily basis {ar an a Monday following a weekend) the Subpostmaster prints a recent
fram the &TM showing the amnant of canh dispensed. The cash dispensed figure 1s then
d inte Honzon by the Subpostma:
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Cunfidentiat
5.6 Sinmilaneously, the arnount of cash:
ATB,
dispensed is aisc automatically transmitted to BEN by the
Thss poaans that thers are ten parailel renords kept of the caste been dapeased dy the
ATM: one by the Subpastrnaster on Horizon and one by BOL
S7 The Report nates that there are situations when these two systems can become “aur of sync”
with one anether, with one recard showing mere or ispensed cash than the ather
recond, This could be caused by the Subpestmaster entering the wrong figure on Horizon,
5.8 What is sat nighlgbted by the Report is that ever: if the amount of money dispensed by an
ATM as recorded un Horizon by the Subipasimaster is dfferant frora the arnauat acts
disnensed a3 recorded by BOL t fore resulting i the recards being “aud of syn, this.
yeould not result in there bemg a fess to the branch. This ss a pure accounting error by the
branch,
SR There ss a subsequent recancitation of the Horizon figure agamat the SO! accounts. Thee
means that any error ont the Horizen account as to the arnount of cach dispensed by the ATM
would be picked up wathin a matter of days and corrected by way of cactions Correction
to the branch,
5.10 As a result of this process, there is ro difference im the amount of cash held on site. Indeed,
the above accounting processes do nat require anything to be done yath the physical cash et
ait
5.44 Simply because the accounts ray be “ou? of spre” does not mean that there is a lass suffered
by the hrantch, In surnrnary. the air gap / out of ayric issue cammat be @ cause af loss in
branch.
Complexity of accounting for dispensed cash
att
42 & nanagranh 5.4 the Report states that the Pest Office avatern for operating ATMs a “e
hunian intervention... thant thet bancatiy needed in
“ify wi
», bawever given the focus 0
complex arrangenient requing greater
of darks’ The Repart dues oct
see High part of the branch accounting
process & considered More cer ut of syne issues
an that the Report is levying this allegation at the accounting process for dispensed cash:
{see above}.
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S42 The Report's sonchicion ts net qupparted by any eudence and does not outine the differences
between Sout CHfice’s and a hank’s processes cave lo say that banks ATMs are folly
computerised.
yh S 1G, the Report suggests that Appheant:
a)
pay
S
At various paints. and pariculacty para:
found &
te accaunt far cach being dispensed from ATMs. Lite evidence is presen!
to support this weew
fa
be
om
As descrihed above, the ATM aidamatizaliy recards the arnount of cash dispensed. The only
part of the process that is manual is the seed for the Subpostmaster to tak
dispericed figure from the ATM and enter itinto Hermon. Second Sight has adapted the
Gag! for this mane
phrase “4:
i interaction, As far as Post Office 1s aware, is not a phrase
aed hy aay Appunard.
S42 Wethin this accounbng process, oe calculahar or cording @ required
‘a literally typmg a
sinigte figure inte Horizon en a daily baci. Given the absence in the Report of any extanstion
on
or justfication for the view that this enpies’, Fg
#25 Sot accept that this process
irier’.
we
2% The Report appears to rely on a number cf extracts frors Pact Ciffice’s Operabonn Manual ic
show that the abave accounting reethod was toc carfucing far same Applicants. Paragraph
5.43 states thal ihe “out of av” prablem cescribed above, was Corarnanpiace prem to
February 2005. However, the Report sets aut the opinion, at Paragraph 5.16, that the
instructions frarn the Qperations Manual represents an example of the complex instructions
and 4 cause of confusion. Paragranhs 5.13 and 5.15 are therefore e contradiction of ane
othe firet caving the pe
from the 2008
2 olher saying the problem re:
5.48 The Report does
Insteurtions growded par to the Pebraary 2003
Operations Manual or any subsequent updates, No assesament is made as te any change in
epariing af prabi relation te s land specifically out understanding the
ey after the February 2008 Manua'
inabruchans} befor
update and im particular whether or
‘it
been made in the Report. Together with the fact that
not there 9 2 increase oF reduntion of the potential for errors.
fundarees
assescment and considerahun has
no evnlence is provided to confirm
now many Applicants did attribute errors to these for any
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ther} mstructions, whether before or after February 2008, means there is nu evidence to
support the Report's wew that the ATM ancaunting procedure was too corny
ATM Sepsort
$49 7
¢ Report coun tbat Applicants have alleged that the Helpline repeatedly told thern that an
reepect of the “out of sync" errar the “pradlam would sort doelf oud. ih ales stab
paragraph 5.19 that the advice from the Helpline was madecuate and misleading. There is no
evidence pri Ate suppert ether allegation, The advice provided needs to he
& Case by case basis as there 1s ne eviience that there is a vader issue with the aaivice
thas nat beers shown to be a thematic msi?
provide:
5.20 Even if the advice prowded was that an error would “sert dtseif out’, in hydt of
8
reconciliation between Honzen ani BOt fac descoted abave) there was an “out of aye”
probler it would be corrected by a Transaction Correction. This would prevent the build-up of
ary axcnorhey shortfalls, Ax explained above, there is qo inss caused ta a branch by an “out
of sync isoue as the overall cash in branch relating to the ATM remains the same.
B24 Gverail, the assertion that the support provided was inadequate has not been supported by
any eadence or kigcal reasarng.
Weekend trading
5.22 Paragraph £18, which considers trading over weekends, appears to have no relevance ta the
cause of fosses on the ATM. Post Diffice is nat aware of any specific issue with operating an
AYS ak weekends,
Power and telecormmunication sues
£23 Paragraph 5.20 of the Report states that mary Applicants have « enter on the impact of
snrounicabons faihives or: the ATM. Th:
pawer af Leet
art ackrcwtedges.
when they have dates af power or telecornmnunications fadures, Applicants cannat clearly lek
them ic speutic deficiencies in their branches.
There are standard recovery processes m piace te ensure that ne data is fest a upted
This recovery process was reviewed in detat by Second Sight ir their Interim Report and
fours) ig work, Past fffice remans confident that branch accounts wil pnt be :
upted dur
to power or telecommurcations faik
45
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Despite thie, the Report spexudates that the need to re-tion! the ATM hy efter the
Subpastmaster or GEN contd Unirodure & possiive owe of ulate toss ercorruption. This
cararment is not quoperted by any wadence either fram a speutic Spplicant’s case ar general
evidence that such srohler may exist.
5.26 Post Office therefore remains confident that date carmot be corrupted as suggested by the
Report
Retracts
S2? Paragrasts 521 te $25 discuss failed cach withdrawals. As garagranhs 5.22 ara 5.
vf cash dispersed is not physically rernuved then after a pened of tee the cash ell be:
retained by the STM. This is known as a retract. reoccur for 4 cantber of r
ner pets chatracted. 11 15 alsa possible thal retracts can be subier!
mers. The Report indoates that Subpatnaciers might be hable for tosses
caused by this fraud. This correct where Subpostmasters have failed to account for retracts
correctly Provided the a done correctly, a Gubpestrnaster aati nat he kable for
aaoy ines. retract fraud.
S28 The accountng pre 4 15 a foligwes:
a. Each werking day. a Subpostmaster yn: ne ATM Bank Totals receipt (which is
generated by ATM te see f any retracted trary ang have taker: place. The
receipt will show the number of retracts
5. if any retracts have taken place, the Subnostmaster must phyucaily rernove the g
retracted nates fr ne ATM (whinh are stoved in a separate part of the ATM frora
Pah},
¢. Per aff retracted cash removed fram an ATM, the postrnanter urd Bred
report ae Horz< sarie day {ucing the ATM
Surphis Cosh tatton an Hoezen!, if a retract accurs when the Past Difice branch © p
sid be removed and reported on the next working day.
dt. Onne reparted on Horizon. the retracted cash the branch safe and Ea
forme pari of tbe sash holdings of the branch,
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Coniidentiai
29 Custarners’ accounts will be debited even though they cid not remove their cash. 5 is atten
wr
re-credited but itss art issue far the customer and their bank. although Post Office will do
what Hi can ta assist both to resalve thes issue At this paint, the branch accounts will balance
as the arnaunt of cash physically dispenced (including any cash subsequently retracted} wilt
roatch the cach dsgensed figure on Honzan and ibe arncunt of cash in the retract cassette
will bave been counted and added to the branch accounts.
530 Retract fraud occurs where a customer conducts 4 withdrawal transaction from ther own
bank atcuunt using an ATM. When the cash is vended, the customer looks ta remove the
middie notes, leweng the isp and hotiarn notes behind, thereby hoping to tack the ATM ig
believing that tte cast has not been takes, The ATM ther: retracts the remaining cash heck
inte the machine, beliewng that ¢ has retracted the entre sum withdrawn. The fraudulent
‘ds for the ATM in ques?
castorner’s intention i that when the baok checks the retract r
n.
st see that there was a retract recorded against the customers withdrawal transaction and
would ther fully re-cresit the custome’s acount,
2 Provided the Setipestmaster follows. the above procedure i relation to retracts, he will not be
lable for any ATM cash logs caused by retract fraud.
Posh OFine pravides to B08 detads of the amaunt of each retracted cash transaction ac part of
». BOF
ctual amount of retracted cash rersaved frare the ATM and the arnount of the
ses, that inforraation ta luek fer a rnatch
its amekly ATM balances recorded on Ho
beberer &
original cash withdrawal transection. if there i a match, then this will indicate that here has.
been no retract fraud and the full arnaunt will typically be re-credifed to the customer. ff
panty. then BO! may undertake further investigaians i
there ts a dis
33 As iong as Posi 2 can prowde the daily reteact, declayatinns from Horizen then any fos
caused hy any retract fraud does ant fall on the Subpostmaster,
&
fa Subpostraaster doas not declare a weekly ATM balance through Horizan, which includes
the arnount of any retracted cash, then Pest Office cannat provide that information te BOL As
a0} has not beer provded with balancing informations :t 4 unable to determune whether a
retract was frauiglent. The full amourt of the cach withdeawai re-creditad te the customer ss.
therefore charged an by BOL to Past fics,
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Canfidentiat
Whore Post Offic
sarge ta the Subpestmaster by way of
a Transaction Correction where the weekly ATM balance, including any retracted cash records,
aye pc ewalaide because af the Subpostasater's fadure fe follow proper acourtag
555.
B36 fi shoidd be J that where the retract was not fraudulent, the con
rect aminunt of cach oad
have heen retracted inte the ATM, Ever if the Subpostmaster has not properly accounted for
his cast on He
the retracted tach wall shi be in the branch {ee
eran the branch's cach
he ATM} as surplus cash, This surplus cach will offset any Transaction
ection for faing to follow praper accounting procedures.
S37 Where retract fraud has occurred. then
surplus cash recovered from tte ATM
wilt be tess than the arrxsunt of the original cash withdrawl transaction. This discrepancy w
fail on the Subpostrnaster i they have nat followed the graper accounting procedures.
5.35 The Report does not suggest there is any failure in the above procedure that may cause an
waywarrenten loss to a Suabpor 2 FEAT nfident that prowded
se 34 followed by a b 1, & Subpectmaster wil sat be Hable for tees caused
he above process, then they may be fable
f the cach lost to the fraud Pact Office considers that tis allocation of
‘biity for preventing retract fraud §s far and Subpastmasters cari avard all ask
by folicenc te abere se
#6 that there are other farms of fraud that may be occurring. Hawever, #15
of fraud Gincioding retvact fraud} that creates a less to
provided they fallow the correct accounting procedures.
Conclusion
{a Subpostmaster follies the appropriate procedures they vali not be able
for any ATM loss due to an “out of syne” problem or retract fraud. Post Office dors not agree
that the instructions and support im relation te ATMs ic inadequate. Ne evidence is growcied
te support this positan nor have the large nurnber ef ATMs across the Post Office metoark
that ave aperated vathaut cancern anpe
This would sugport the
pociten that the aperatrig practi: r ATMs are clear, understocd and wark m gractice
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Post Office's resporise to section 6 ~ Motor Vehicle Licences
ot Sechon 6 of the Report considers the issuing of Motor Venicle Licences (MYL). The Report
iteell nates that oniy 8 reali number of A, ats reported probleme concerning processing
MYL. It 4 not therefore clear that this can be considerad @ system wide issue of general
application.
&2 Paragraph 6.1 descnbes a prabiem encountered (by what Post Difice believes to he a single
Appticant) wher
aprinted with the meormect barcode. Form VIC
rm VIIC ithe forrn used hy customers tou renew MV. tax discs) was
sxt produced by Post Office bid by the
DVLA and therefore this was an external error. The Report states that the effect was that a
gale was recorded as 4 12 month fax renewal rather than the 6 month fie a3 was Sodeh
The Report states that whilst the customer yroutd have patd for received a 6 month tax
disc, the accounts would have recorded a sale of a 12 month disc and, as a result, there was @
ents,
prtential lability te the Subpostmaster for the additional 6
6.3 This ts meorvect. The barcode on the VILE form does not define the duratien of the tax disc
but the overall cost whether taxing a vehicle for 6 or 12 mordths. AYLAC is printed ath tick
baves for the customer fo canfiren whether they would like tu tan a vehicle far 6 ar 42.
sronths Upes scanmag the VIC. which idenbhies the registered vehicle, Horizan
the user to enter whether the castomer wants a 6 or 12 month tax suse. Hf the barcare
printed was incerrect this could fead to a charge based on a different vehicle, which could be
anteohally more or less than the appropdate charge if the eehich: idendbfied hy the barcode «=
ana different tax band to the custar toat vebucie,
&é # there ss an error with a barcode, it would be an issue with the tax banding not wheiher a
vohicle is taxed for 6 or 22 months. The issue cad benefit or disadvardage the customer.
However, Honzen would wate payrnent af the level requested by the barcade, Prawided that
suffer a less
payment yeas taken for fhe arnciant caquested ty Horizon the branch would 5
ay there 15 no jose or gain from the transaction: from the branch's ari Post Office's
jesirable (and Post Office woul
Whilst this tose si dear’ all possible
perseped!
assistance to the customer to correct any error on the DVLA msued V140 form), this issue
does not impact an branch accuunting.
65 Paragraph 6.2 speculates that if this tyoe of discrepancy occurred, reauiting in a fess far the
branch which the Subpostmaster would be liable for, the arnuunts could he significant. There
appears to be no evidence to support this ass This appears to be a one off incxient,
VW
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Confirdenbal
created by a barcade that was created by & third marty. the DV!
to a particular Applicant's circumstances. Post Office cannct si
thematic issue affecting Applicants generally.
20
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Post Office's response to section 7 ~ National Lottery
FA Sectinn 7 concerns National Lotiery transactions which are describe! in rnore detad at
DATAgoaD 5 af the Fart One Briefing. In particular the Report highlights alleged prabierns
that Subpestmasters may have in relation to (1) seratcheards and the activation of then ard
(2) sales continuing outside af Post Office }
ours of Lottery products in a conmected retail shap
seguiting on the Hi and Caroziot terminals beng “out of
Activation of Scratcheands
“i
Paragranh 7.2 states, correctly, that before February 2072 any Lottery acratchcards received
by @ branch had ta be manually “sctvated’ on Camelot terminal and then remmned in to
Horzon, This preceus s dese:
Abed in roure deta at paragraph 5.42 of the Part One Briefing.
74 Paragraph 7.3 of the Report descrites haw a branch could became “out of sync”. This means
that the activation of acratcheards on the Camelot termunal did not reflect those rerimed sn on
Horizon, This wauid result wm either & surplis or a deficiency of acratchcard stock i the
branch accounts. remudy this error. Post SH
ane Carsaict cosducted dady
reconcihations of the data on the Camelot terminal end on Horizon, Where there was 3
discrepancy, a Transarhon Corraciain yauid be issued to the branch.
2a Any errors that occurred thraugh the fadure to actwate or rent in scoatcteards ware errors
that occurred in branch due te s failure ta foilaw the correct procedure and therefore were @
Subpostrnaster’s respenaibility.
FS However, the effect of nat rermithing m scratchsards inte Hosizun wall nat in itesif create a loss.
The physical seratchcard clack will cdl he in the branch as it rust Rave been delivered to the
branch for # to be actwated on the Lottery terminal, The Transaction Correction only
increases the amount of scratchcards shows in the branch accounts ty reflect the arsount
actually on hand.
76 Hf the scratchcards have beer suid but not remmed into Herizon, the branch would show 4
nagalive cteck value for scratcheards (as each vale reduces the stock line in the azenurds avert
if this ques below zera}. The subsequent Transaction Correction sili therefore increase the
schatcheard holdin
cancelling out the negative figure and bringing the accounts back inte:
21
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been activated an the Lottery
ct vail happer iF sexatehcards have
terminal but renmed into Honzon,
78 fn surmmary, st is clear that this maue is caused by errers in branch for which Subpostmasters.
are responsible but that in any ewant thes issue cennct be a cource of actual tosses.
Support
79 At parageaph 7.6 the Rey
states that the pro countered hy the Applicat
1a 4 F
procedural improvements descnibed at paragraph $.63
exacerbated by the Hetgine which was nat able to assichance. Post got aware
i
of the specific cals or incidents that the Report is referring to which
re alleged to
demonstrate a thernatic failure to prowde adequate advice
740 This ¢ 30 scue that will
he concidered or: a case by case basis deserting on the
advice provided to a
jdual Applicant. However, ag noted above, the recontiliation
pronesd conducted by Post Office rears that any error would be corrected in due course,
Out of hours sales
VAL Paragragt
2 of the Report describes ar: alleged prabien relating te the syncing of sales thal
39 of the
tinue while a connected retail shop +3 open but the Past Office
take place “out of hours’, Sates of Lottery products fas described at paragraph
Part Cine Briefing) may
Joued. However, the branch seeds to ensure that any cash taken for any “out af
red frorn the retail shee to the branch cash holdings the following day
242 The value of the “oud of hours” sates land any other aaies} will be sutornatially sent ta
each day by way of a Transaction Ackamadedgement which will increase the cash
position is the branch's accounts. The amount of cash te be transferred from the retiad ade:
fa the Post Office side easily identified as the f
2 Transaction:
played 0:
Acknowiedgernient, if a Subsostraster does nat transfer the physical cash from the retail side
inte the branch for these sales, this will produce a cash shortage The Sutpesimaster will be
Inafate: For thes
shortage end of the trading period.
nt
fe
Paragraph 7.7 of the Report highlights an alleged “romeicaton” occurring on the final
We
vesday evening
f the monthly trading periad fer those branches operating Lat
terminals, This + reference to
the trading period reconciliation carnpleted ox
Rather than process the recone! on a Wednes
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Subpostraacters wath Lotlery tarminais have te first accept the Transachon Acknowixigement
Sent overnight and complete the reconahation as a matter of priority the following morning.
The Regort states that tue process was rot always provided by the Helyti
7.44 Pos: Gifice has not sean any evidence to support this ascertion and has pravided Second Sight
sail logs relating to individual Applicants’ cases. However, ne specific calls are referenced to
support this statement
in fact, branches operating a Lottery Terminal needed to make daily cach declarations (see
paragraph 3.2 of the Part Gre Briefing) like all other branches. 4s Lottery sales data 6 spat
eupmight, Lottery branches are instructed to consiuct their cash declarations and end of
trading perind balances {see paragraph 7.45 af the Part One Briefing) first thing in the
event. TI
suring after the Lottery data was was nal therefare a complication but art
adjusted dady promess for branches with Lottery lerounals.
these not to follow “next day” guidance and may have conducted
ees several days later. Post Office operational instruchans have however alverys
provided far next day accounting,
in summary, any loss arising from “out of hours’ issues highlighted in the Report wil arse as
3 result of as error ia the brag er which a Subpostraaster is dahte.
Conclusion
7418 Procedures have evolved ta assist Subpostrnasters and reduce the number of Transaction
Larrechens that aye necessary in relabun te scratcheards, eopecially in relation to the
achvation: of thers, Howaver, the “out of sync” effect created by edher incorrect activation ar
non-wclvalon of sceadchacds or oat correctly cecoriing the out of huues gales are errars:
that arive within branch. The errors were nat due to ether Pos ce or Horizon aod
therefore any lability appropriately remains with the Subpostmaster if & arises.
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Post Office's response to sechon & - Traiing, Support and Supervision:
Section 8 principally conskiers the traming on Horizon sed he
‘fice. ¢
Subpostmasters by Pe: urrently, traimmng for Subpostmasters consists of a mibdure of
classroare tarsing 4)
there
ranch trawwrig. Further toaineny is
avaiable upon ye
sort nebwork includ
g the NOSC, managerial support
Support Advisers This training anid support i describes in renee det
Part Briefiag
Phe Report co
3.2
ments that the training was adequate m relation to “Bu
transaction grovessing but was weak m relation te the end of day, end of week and en:
that there was me
trading peried balancing. fn additian, the Mepert
iderating giver
to dealing with
discrepancies, how to identify the reat causes of prot sand how to
with Transaction Corrections.
‘These views appear te be based entire
nformahen provided by Spplic
in ther CQRs, As nated in the rfrockucton te Uus Reply. that formation remains largely
untested. Fast Office has not been acked to provide any training materiais far review nay has
the Report established any industry standar:
cantrachial benchmark against whirh to pudge
Past Office's performance. The lumited analysis used to sunsart the Renurt’s conctisian ss.
red beinw and shown te be incorrect
24% Given that the Repart, that shaws that Past 0
iS oresented no avic
5
dard tra’
ing is defective, Post Office stands by Wy poacices as heing effective.
Post Office considers tha
ne training and sunport that is pravidled 1 At fer purpose and
adequate tort sbpostinasters. Thea is graven by the thousands of
Satna:
asters who are successfully operating Ho:
Bost Office
an, haway reunwed the teadaag fran
we
There raay of co
where tomar
support has not been oravided to
Post Office's usual standards iwhich is sat impassibte gwen the thousands of Subpostrnasters
trained and supported by Post Office over th 5} but these <aituati e considered on
tive af any general thematic issue.
Mave te Horizon
At paragraphs ©. 4
i S.A, the Report finds that many Applicants found that diccrepancies
The
began to occur
fi reached in the Keport i that this.
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was due te a lack of urdersianding of how the system was dus
2 operate and be used,
miagning ft
y were insuffigentiy trained, had not been able to train their staff properly or
there were sues wiih the new acreen-based processes.
Post Office does not agree with this canclusan arid 1 appears te be urisupported hy any
evidence thai fewer mistakes were made prior to the introduction of Horzen,
angaction
records are not available fer the pre-Homzan perind and @ s nat pass:ble io tact the
consiusion which is put forward. Ht therefore appears that the Report has accented Applicants
anecsiohal recollection af events vathoul any corroborating evidence. Paragraphs 111-115
in the introduchion te this Reply highlights the deficiencies
his approach,
ATMs, Lottery transactions, MVL foreign currency or ather specialist products
me
At paragraph 3.6 the Report highlights that Applicants considered that the Post Office tramers
and line rnanagers were weak in relaban t@ dealing with ATMs: Lottery transactions, Motor
Vehicle Licences; Foreign Currency and other products,
There is a tack of evidence to support these alleged comments from Apphcants, Due to
document retention policies traming records for a number of Appicants are ne longer
available. There aise appears to be oo conternporansous evidence thal Appiinants were not
relabon to ATMs,
provided with adequate support by trainers o:
DYE, A
line managers whether @
Lottery transach
‘eiyh currency or ather specialist products if there was a lack of
understanding in relation to these asi ice would expect the Subpostmasters te
request further training or otherwise seek assistance through NSSC.
Training Needs Analysis
BAL
Traine
support a pecdded thrangh vancus ronans inciding the NEST and managertal
auppert. fn additien, traming materals are provided on a regular basin and further trang
can he requested by Subpe
The Report sates at paragraph 3.7 that further traming was delivered in accordance with user
demand eather then bemy det med by a Tratray Neer Analysis Ss stot correct.
When Subpostrnadters complete ther training there are follow up reviews at ons, three and
aix rnenthly intervals. In addition te co: that the ould be
SiNeSS iG Operating
there is an analysis an the Subpostmasters’ understanding. If there are any gaps, these are
faghlighted and further training can be provided. After this clage there 15 a reasonable
assumption that the Subpostmaster will be reascnably competent. with the sur eiwork
Der
Po
a
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highlighted above, te operate Horizon. Subgestmasters are operating 2 commers!
anid & quest adiitonal assistance and training when required.
Training assistants
Bid Ag made clear within the Contract (at section 15, paragraph 7) i is a Subpostmaster’s
yeaporsibdity te train hisher staff. Nevertheless, the Report criticiass Past Olfice al par.
8.7 Jor not operating a “quality contro! fonction” 1 ensure that branch staff are sroperly
tramed by Subpestmastess.
i Repart seeks to impuse or Post Office a responsibility which is not stated ir
tse paragraph 48 of this Reply}.
4 Anyt
lure by a Subpostmaster to train their staff adequately could be the reason far the
fosaes or incraase in discrepancies. However, any resulting losses would be due te the
Subpastmaster’s error and he would he hable for them (under section 12. clause 12 of the
Contract)
BAS in any event. Past Office could net operate the quahty control functian proposed by the
Report. Gach Sutpostmaster, as an imfependent business person, is free to employ whaever
they wish (subject to registering them with Post Diffica) as assistants and to give their
arnployees whatever tacks they wish
B46 Furthermore, Post Office cannot monitor the performance of individual assistants it does not
exigage or
lay, only Subpostmasters cart de this.
agrees that sa "quality cc function” should he applied to assistants however
be undertaken by Sutpest masters and not F 2. Indeed, in a nurnber of
cases, lasses appear to have stemmed from Applicants’ failure ta exercise any “quatity
central” aver the achans of their stalf,
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Post Office's response ta sectian 9 ~ The Helpline
Sectins 9 concerns the asustance proawded hy the Helpline to the Applicants. Post Office
Finance Services Centre.
operates a number of helplines including the Horizon Heip Deuk ar
Lis presumed that the Report :s referring te the NBSC. More detail on the Heiptine can be
found af paragraph 4.2 of the Part One Sriefing
92 The following certicisnns of the Helpline are usted in the Report:
a Difficulty contacting the Helpline due to limited availabil
> Ushelpfad, script based respanies;
were afford
fa Many d dow prety’, including these reiatmg fa balaricing protterns,
and deacrepances;
d. Contradictory advice that revokes previous advice.
section of the Report repeats allegations of Appicants, These allegations appear
untested (see paragraph 1? of the introduction to this Repty} and the Report reaches no
conclusion at all, On this basis, Post Office cannot understand how this topic 1s considered &
thematic issue. Nevertheless. the allegations presented in the Repart are addressed below.
Ciiculty contacting the Helpline due to lirnited avaiability
B4 Fast Office has previoudy acknowledged that as changes were made to standard operating
4% over the years there have heen periods where the Helphan could be diffcukt to
ds, and the he
er
nontact. Changes were made, especially at the end of trading per
v3 that the
Helpline was available for was extended
98 Currently the cpening times for the Helptine are from 06.00 te 23.00 on Manday to Saturday
and 07-00 to 17:00 on Sunday and Bank 1 he number of
maii¢ to the Helpline.
96 — Statstics available for the peried frarn Aprid 20141 to March 2074 shaw that:
Calls made: 1,825,059
Calls Answered, 1,687
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Average waiting time unti answer: 45 seconds .
Calls abandoned; 127,522 {7.54%}
97 Assan
een from the above calls the average waiting time was just 45 seconds. Over 92%
of aii calls made to the Helpline were answered. Of the abandoned caiis, this will inciude alt
ahandoned calls and therefore will nat solely be callers who have decided to abandon their call
because they cannat get theaagt
the Helpine {for example they may have resalved the
issue thernselves}.
Unhelpful, script based responses
oB The Heipline does not use scripts. The operaters, many of whom are very experienced with
Horizon, listen to the query and
ng ‘c
i Remedy (the contact
management system} the Past Liffice Knowledge Base is accessed where there are articles
relating to that category of call. The operatar then selects the relevant article according to
the issue raised by th ter and relays the : ior: to them, if the Knowledge Sase does:
not provide the relevant information there is a second Ler of adwsors that the enguiry can be
escataied to.
were affarded “Low Priority"
9.9 There is no prianty system in place:
far calls to the Helpline with the exe
relating to robbery or burglary. Whilst those calls are dealt with as a prierity other calle are
eda
salt with in the order they are received.
addition, :f the Subpostmaster was nat. sat
20 by the arlvice provided they could seak a
higher level of supy
a3 descobed at paragraph 4.6 of the Part One Briefing
Alleged cantradictary advice
911 No evidence ic presented in the Report ia suppart the weer ihat contradictary advice has bean
giver: by the tine.
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Sereral
«”
pa
esd
2
Hs to the Helpline are recorded by the Helpine operaicrs m the NESE call lags, The logs.
describe briefly tte nature of question and the answer given # apprapriate. The Report slates
that there is insufficient evelence within the call logs that have been provided te thern to
cpachate what advice was provided. However, Post Office consis that calls were riot
beng answered or addressed approgriateh either the matiers would he esnalated dwhich
would be noted} of there would be repeated calls about the issue that the Subpastrnaster wae
facing. There would be evaenc it the advice had not resolved the prablern ar the
Applicant was not happy with the advice, The absence of this or other evidence to the
contrary suggests that the calls had generally been reacived satisfactorily whilst accepting that
there may have been individual calls where an Applicant was not cortent yath the advice
prowded.
9.43 At paragraph 9.2 ihe Report stetes that a frequent commer by the Helpline eves that matters
would resolve themselves. 116 likely that this was reference by the Helpline to a Transaction
Correction being generated following a qurchis or deficiency and that would resolve the isaue,
GAS Through its ow: nvectigatinn Post Office has found ne evidence to support the allegations
that Helpline would often merely comment that matters would resolve themaeives ar be
diamiaaive of any enquiry. In addition to the mitial advice from the Helpime. if matters coutd
not be resolved they
cnuld by escalated te & higher fs upport, Suppert coudd have beer
provided by Field Support Advisors or oiher manageriat support if it hat head requested.
Past Office i¢ not aware af any wider systemic problems where this support was not being
provided.
20.3
Post Office's respunse to section 10 ~ Li
itabians in the Transactional
adit Trail”
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Section 16 of the Report considers what it generically refers to as “limitations in audit traits”.
The Resort is concerned that Subpastmasters are not able to Imvestigate the rout cause of
errors
leven where they adi
aaress fo macecsary transaction data,
The Regort considers three situations:
4 Data that 5 out available
b Uata that @ available hut after 42 / 60 days ss
ie: general, Post Office considers
pf th ator: nexied hy branches te inv
iS caused by ther own or ar
day of the transaction under inves!
fag section is prerdised an af
gar avaiakie; and
Data that is nut avaiable afer suspension,
ate losses.
“branch error} due to a tack of
nderstanding of the nature
if at the end of a day, a branch produces 4 cash declaration that shows a discrepancy, then
the be
investigate the possible causes for the discresaricy Gnctuding @ cory
jete brie by fine f
have access to a range of reports an diferent products and transactans ta
ail transactions that day}. This atss applies at the end of the tracing period as a trading
period & either 4 or 5 weeks (23 or 35 days} and the above reports and dats have always a
been available in branci
if a Transaction Correction is sent to the branch, the information needed to verify the
Correction wal not be th
Transactio
veer: Gener ¢
records held at the bra
Horizon data (Post Office has thi
Correction}
a minimurn of 42 days.
Data that is not available even from the day of transaction
Paragrapts 10.4 t 10.8 of ine Report.
te Sub
vasters event on the day theft a tranaactic
ooue that some inforviatic
crnation 13 kkely fo be <n the pay
takes place. The example provid
data and takes this inte account
is not available
the Repart 1s where an aggregate amaunt or volume is provided for Debit or Credit Card anny
yransa
of each day rather than @ breakdown of the
nidhial tranaactions. As a result,
tions. An aggregate amount for the number of transactions was provided st the end
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states that Subpostrnacier:
are not able to identify the individual transaction that may have
caused a balancing error,
The Report considers thi would prevent a Subpostraaster
from roitigating thei foss or rernedying the error by contacting the customer. This pesitien
was allegedly different prior ta the introduction of Horizon when paper recards were kept and
be rewewed
10.7 Past Office does net uoderstand it card information hag
t
line of a
qutty. Debit and on
never heen retained on Honzon in branch ~ indeed doing so would be a breach of Fayre
Card industry standards (and Horzon is PC) accredited), However, a5 mentioned above,
branches have always had ace y ine waosackan data each day acd this data
records the methad of payment leg. cash, cheque or card}.
Data that is availabie but after 42 days is no tonger available {this was extended to 60 days}
36.3 On the original Horizon syst
days after 3 icansartion
60 days,
40.9 The Report considers that wath data only berg availatie fora firaited perind of lime, it may
not be availabie to support a challenge by a Subpostmastes ta 3 Transaction Correction that
may be issued after the date that data can be retrieved lie. beyond 42 or 60 days}. The
Report states that this restric bpostmiasters: ability te
hallenge Transaction Corrections.
36.29 What the Report dees net take into consideration @ that Subpostmasters may challenge a
Transaction: Corcection without transaction data. Alse Transaction Corrections are often
preceded by an enquiry and se even ff the Transaction Correction beyand 42/60 days then
an enquiry may well have been received within the perind enabling the matter to be
swestigated within the 42/60 day penad There is a wade range of ewdence thet can be
provided to review or challenge a Transaction Correction, is very product sperific and
noha general view across all data entries. Typically, the necessary data is kept in branch
records rather than on Horwon. These documents should he retained beyand the period that
data is available threugh Harizen and is used by Subpastmasters to ch
nge or review a
Transaction Correction,
40.14 For example,
transactions (see section 8
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printed daily by the ATM which shows how much
has been dicpensed by the ATM
athe imports
ommaton. This recept roust. be retaried m branch No access to Heriaon
ch ag all the re s “Totals Ri
data te ri
402
in the Repart that Horizon data needs to be available for racre than
correct, Ary challenge io a Trarwaction Corre:
n, god the data needed to
dot a product hy product basi.
at there is insufficent data or
information availanle to Subpasim: atierige and review Transaction Corrections. it
«s confident that :t will be able to show that suffic
i infors is available te
Subpostraastess
Data that is not avarlable after suspension
1043 Paragraph 10.19 of the Report
« that sarne Applicants were refused access to data
following their suspension and access to ther own records that may have been seized upon
audit, As a result they say that they were onable to defe:
d thernsetves from ary claim mate
by Post fiffice for tha recovery of monies.
40.14 Whilst Post Office are aware that some Applicants have raised the issue that their own “
records were rernoved and nat returned to ther there @ no evidence produced or referenced
by the Regort te aupaart the position that data being withheld has areudiced an Apaticant in
any way.
40.45 As te other branch records, these are the property cf Pest Office. In the event of 4
Subpostrnaster being suspended, Post Office may take away carne branch recards far
investiga’
Gira Transactions
VOTO A connected issue thats considered at paragraph 17.4 of the Report is the process relating to
Gire Transactions Gunder the heading “caunter-errars that benefit
Transact
ity
olved a two-part paying in ap with one copy retained by the custemer and the ather
retained by the brarich. At the end af the day, the bra
py couki be crosi-referes
cad t
the entry made or Horizon te check for any errars by the branch in keying in the wrang figure
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into Herzen, This process changed to a chip and pin system using a awine card at the
request of the processing bank (Santander) thai rar: the Giro hanking serwce. Fe
change. no deposit slip would be presented by the customer and no paper decumentation was
retained by the branch,
The Report states that due to the change in this process there i nothing to alow the
Subpastmaster to check whether or nat the cash deposit entries on the system reflected the
sant of cash deposited. This is meorrect as the arnount recorded on Horizun to be
is now confrraed by t
sited fine mt branch
customer thraugh the chip and pen ma
‘This is the same process used hy all high street banks which have also maved away fram.
its
nay pS to card based di
we
Es
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Post Office's respanse to section 24 - Transactions not entered by Sokpastmaster ar their Staff
DLA Sectan 14 of the Repart considers transactio:
hat have not been entered by the
Subpostmaster oy them staff such as where there is stomaten transactional reversal
‘This anpears te be the came underlying iasue as raiser in section 12 - see that section far
Post Office's reply.
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223
ba
Fa
i
re
iS
wn
fey
Ne
oe
Post Office's response to section 12 ~ Transaction Reversals
Sechon 12 of the Report considers the issue of Transaction Reversals.
action Reversals are where part of a basket of rarwactions is reversed because the
basket 15
errupted before cormpletion (tyricaily due te a pawer or cornmunication fai
The Report ctates that when a Transaciion Reversal happens, Horizon records the reversal
against a user iO! of the Subpasimaster or ier of staff. The Report states that this is
museading because the reversal is “automatic”. This mterpretation is incorrect.
As far as Past Office is aware, this saue has only been rased as part of a Spat Review
conducted by Second Sight whilst preparing its Interrn Report. The Subpes
master who put
forward the Spot Review has decided cot to make art Application and io other
Anphicant has rassed this issue.
As detailed m Past Office's response te the Spot Rewew (full details of which are confidential
in order to protect the privacy of the Subpasimaster whorn it concerned). the reversals were
caused by the Subpestmaster cancelling a nurnber of transactions that they were conducting
for a customer, The user's Systern If) s shown as the persan making the reversal because
they initiated the reversal process,
3 and 12.4} are
The extracts taken from the report by fas qucied at paragrapt
taker out of context. The report was advressing concerns thai reversals were
g
3
é
clearly shown on the particular data being reviewed fle. the ARO and credence data being the
rnain transaction data used by Post Oifice) However, this data 1s available an other recards
that car: be extracted from Horizon. The report makes clear that this is not an tsue with
HH
izon itself or st5 data but the way that the data it produced was presented within one
partinuiar data fag. ft does n:
suggest that there was any entry being made that was not
imtated within the branch Dy the Subpestmaster ar their staff,
This section raises no issue that could be the cause of Inases in a branch,
38
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Be
Sestian 13 of the Report facuses on the rernitianee of cash and stock tc and from branches.
Paragraphs 7 16 and 7.29 of the Part Ore 6
BreMthance rod
ONS isaues can arise such as cash pouches sot being recenved or there being
e cash within the pouch than stated. This will rest im @ Transaction Correction being
sed,
ch and tic nat recetved this wifi dot resutt os
he cash centre remite a cash pouch to &
a
& loss iG the branch, sh centre will mwestigate why the pouch haa net arnved and
idtirnate’y hear the loss The cad
it
sranmed upan recesit by the branch and therefore
only al this stage thal the caati 5 regstered on Hort huang hed in boanch, Frere this.
tity of the
gexnt any loss of cach i the respon branch and Subpostraster There may be
some occasions when the gouch barcode val
He carsuairie!
af,
ces the gouch is
entered as received manually by keying in the barcode number
if there is more cash within the pouch than the branch should renort this within 24
hours of receipt. This will result in a surplus to the branch and a Transaction Correction a
sssuied to correct the balance on Henzon.
stances where the po
Mm expecied the matter should be
reparted by the Subpostraster within 24 hours of recemt, The scue is investigated ty the
Post Office cash centre. if the cash centre arcenis that the pouch contains tess cash due to
thei ay the Ter
sgated te the beanchs bo
«they volt
correct the balance on Honzon.
Where the ca ire does not accept thal & i error thm Sutipostmaster Invited to
review the security cameras that monitor the loading of cash inte the pouch at the cash
centre. Hf the Subpeatmaster wishes te continue te challenge the amount recenved they car
de so through the
f ieee
the game way that ¢ Transaction Correction: 15
held on Horlios a Transaction Carrechors vei
cast # dé be issued. The toss
pnd secobeent
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when rensived hy the cash centre the Saue is investigated. The Subpestmaster has the
epportunity to view serunty that rnamtor the p
evermnt of the pouch and can
choose to accept the shortfall / surplus or place the loss / gai inte the suspense account and
investigate the matter further
42.8 Paragraph 13.4 deals specifically with the mstances where foreign currency has bi
acade
ally sent to the wrong branch. The Report speculates that this could result ina.
Subnastrnaster being responsible far a delivery that was never receive
43.9 The same process cutlmad above agples to fareign currency. If a pouch is not received by a
branch i will not be scanned into Honzon and there will be ne ine ys. tf
the pouch is nat received there is no loss te the branch.
13.40 Where the pouch is taken is 4 different branch i error it can he rejected and will be returned
to the cash centre. if an aiternative branch accepts the pouch it will be scanned inte Horizne:
and increase the foreign currency held at that brancn. Transaction Corrections will be icoued
io correct any dacrepancees that rnay have beer crested but overall there would be no loss te
aither the hranch inet received tne foreign currency ar the branch that accepted it.
a
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Post Office's response ta section 24 - Cheques,
44 Sexton 14 of the Report discusses the pronass of remutting cheques from Post Officer
branches te Post Office's cheque processing provider. K considers the situations where
cheques go ms: 8 rneEsser, ar cannot he grocessed hy the
qand do sat reach the che
customer's bank
442 7
8 nd the
process followed when cheques go missing or bounce.
14.3 In suramary, it is inevitabi
heques will ucrasionally go missing at seme stage in their
processing. However, as stated in paragraph 14.6, provided that the Subpastmaster follaws
the correct promdiure fer processing the cheruns in branch this will aot reauil na
cast of & jost or bounced cheque i only passed to a Subpoatrnaster where there is cia
evitience that the Subpostrnaster hac failed to fallow praper acceptance ar remittance
and Pe ¢ exhausted aff other possbilities of recavering the
of the Contras
BrOcesse!
cheque. This is dune in accordance with clause 12, sect under which
the Subpastmasier is table for any losses cased by carelessness. negligence or error,
Frocess in branch
344
i Post Office branches are entitied to accept cheques from customers as the method of
nt for a vange af dexqnaled fransachems, The cheaue should be scrutinised by branch
staff ta make sure itis not a forgery and the reve
e of the chenue needs to be date atamped,
ixtiatied and the relevant transaction details recorded. This will enable identification of the
specific product and/or customer in the event of an error, There may be ne customer detaits
recorded on Horizart against the th reed te endorse the
with those detais,
Pod
=
a
The method of payment (MOP) by way of cheque shou'd be recarded on Horizon. When
is automatically recorded on Horizon
recording é MG! y cheque, the customer's chear
ag & part of ihe branch stock
4A6 I All chenues taken shou! 3 from the branch via the final Royal Mad collection af
the day lexcant Fridays}. The branch process for remitting cheques i¢ as follave:
we
Bs
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a Subpostmaster produces a cheque listing repart from Horizon dwhich shows the value
of aach chegue accepted that day}
b, Subpostroaster verifies that the cheques Heid in the ti rratch (volurne and value}
against the cheque isting report,
f. The total chenie value is © « being remitted te POL {knawen
as “remmed out’)
ad A hether cheque listing report is produced. This will show the cheques heing
rerarned oud 35 3 negative vahie and the repart will now total zero.
2. The cheque doting repari is “cut off”. The branch cheque stock wall now alse be zero.
i & Batch Controt Voucher (BCV} is manually completed te show number of cheques,
vahw and despaiching branch. The cheaues are athached ie the BCY. The cheques are
then despatched for processing mm the relevant envelope via Royal Mail to the cheque
processor,
o Herzen chegur listings and ren sce sips are retamed in branch.
FSC process,
14.7 The POLSAP finance system at the FSO js autumatically updated each night fram Horizon ffir
the values of cheaues cerned cut frorn branches}. The cheque tears io FSC are able to view:
this data the day after the transactions ard vail see the outward rernitiances record
Y48 Sirnilarly an eleciromc Hite will be recewed overnight by FSC from ite cheaun sracessar wa a0
auiorsatic upload mio POLSAP which shows the actual cheques received from each branch,
can then cornpars the values recorded hy the branch as despatched against the values
vei
recorded by the chaque processor as re
44.9 — Apprasiroately 1,000 entries will remaim unmatched each day fie. there is a discrepancy
between the chegues receved by the cheque processor and the information sent vie Honan
hy Stibpostroasters about cheque remattances) and could be an indication of missing cheques.
Mary cases are resolved quickly ie. iate debvery by Reyal Mad ar the Subpostmaster rrased
the collection or fargat to pat a cheque ina pouch}. There vall be around 105 cases per
snonth where # becarnes apparent that e chaque hes actually gone “wisaang’.
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inveshgating lost cheques
in tte Royal Ma
sowledged thai a chegue fess could occur at the urart
sar, Post Office's policy is that a branch wall only bear the cast of a fast
8 not followed proper procedures. if the root cause of s lost cheque ic
unknowr of attributed to sare other cause outs: @ branch, Past Office wilt abcorb this
foss and not pass if on te the Subgpast:
ALIS.
vast majority of cases, Pa ce either mitigates the loss caused by a lost che:
absorbs the fuss itself, Cinty a very smaff number of missing cheque cases result in
Transaction Corrections being issued ta a branch.
A4A2 The process for investigabig essing cheaues is 3
a The trangaction te which a misang cheque relates is Uf posstbie) identified fram the
information input into Hanzon by the Subpasimaster.
&. Branches wl be contacted
G ChexHue Case iG set up to sae if ihe
cheque can be fonind in branch or f thay are aware of which custamier has presented
the chegue which has subsequently gone masing.
he branch cannot find the inat chegue, a variety Sug 28
5
praduct/information available) are emolnyed to xentify the customer and their
address fram the transaction data.
d. The
stamer ns 1 contacted to renuest a feplaceroent chenue. if a regiscemer
cheque 1 provided then the loss to Past Office is avoided
a. if a replacernent cheque is not forthcaraing, the relevant client orgarmsation fe. the
prod t Agency, etc.) 1s informed that the
ppiter
payroent for that pact beer received and the transaction és
reversed where passibie, By reversing the transaction the loss to Post Office 3
avoided.
in Atternatively, «f Past Office s unable io identify the custamer det 2 relevant
chent organisation may be asked te try to contact the customer directly for payment,
By payment heinig mae direct fram: the customer ta the chent the loss to Post Office
is avoided,
a
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g. if the transaction related to the mic: cheque cannat be identified or if the
transaction 3 identifabie but payment cannot be recovered from the customer or the
client and the transaction cannot be reversed, Post Office will absorb the loss of the
cheque provided discussions with the branch and review of transactional data does
pat reveal a breach of the operational proresses.
44.44 There are twe typical scenarios where Subpostmasters have fasted to follow aperational
processes and will be held kable for missing cheques:
a Chegues have been accepted by the Subpostmaster for @ nen-cheaue acceptable
product fe ¢. foregn exchange sales? By accepting payrnent hy chegue for
fe
cheque acceptable praduct, R raay not be possible ta tink a missing cheque te a
transaction record, if the transaction record cannot be identfied ther & may not be
a then frustrates Fest Office's usual
possible to identify the customer andfor chent. 1)
los mitigation steps described above.
The methad of payroent has not been correctly recorded on Horizon with the cheque
axe the MOP and i subsequently prowes iropessitle to assuciate any transactions veith
the missing cheque. Such an instance will typically be iflustrated by branches
ding muitipie/ail transactions through "Fast Cash” and then mtroducing a bulk
cheque value to Horizon wa a “Cast/Cheque Adjustment’ at the end of the day prior
to reraitting out. Again, this may frustrate Past Office's usual losy mitigation steps.
hed above.
1444 Where a Subpostmaster is held lable for a missing cheque, a Transaction Correction will be
sent to the branch reversing the rerittance of the cheque by the branch. This will return the
value of the “missing” cheque to the branch's cheque stack. jf the branch cannat obtain a
replacement cheque from the customer. there will be a cheque shortage at the end of the
trading period that the Subpastmaster wil nead to make good
Bounced cheques
cornplaints by Applicants (rather than # keing a
44.15 Paragraph 14.4 makes referaane ic spe
caer 1 therne amongst Applicants} that they were liable for cheques that bounced. As
described above, the branch accou eat cheques like a stork Heme So for as the branch
accurately records the receipt of cheques from customers and the remittance of cheques to
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Post Gifice, then the branch :s not concerned vath the banking of any cheques
of cheques and recavery of payment frore customer's bank is canducted by FSC. Post Office
absorbs the credil risk posed by accepting payrnent by cheque and shoud a cheque bounsne,
Post Office will absorb the resulting loss FF
A4A&
: only exception to this nile is where the branch has failed te follow operatianal
adures. This may have included oot completing the details in accordance with a cheque ‘
yt
guarantee card unit these ceased in 2017) ar taking payment for a product where payment
by cheque is not permitted.
‘Transaction Corrections for missing or bounced cheques
44.07 Paragraph 14.5 makes reference to Applicants not being able to mitigate the: losses Ye poe
transaction correction for a missing or bounced cheque has been sent to them too long after
they accepted the cheque. Transaction corrections may be delayed an occasiuns but this is
not the fauit of Past Hifice. In same instances Post Office is dependent on a response fram 3
ad
third party (such as the customer's bank} before the Transaction Correction can be 199:
This may have resulted in some delay but, as stated above, if the correct process is followed
Subpastmasters will nut be Sable for any last or bounced cheau
44.18 Typically, however f there an issue with 3
neque thy
issue will he raised through other
branch In mest
ses, the branch will be aware of the sue long before
ransaction Correction is submitted,
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AS2
Post Office's response to section 15 - Pensions and Allowances
Section 15 of the Report concerns the nsk of fraud taking place in relation to Pensions and
Allowances (P&A) transactions. in particular the Report states that Subpostrnasters coukt be
imocent victims of this type of fraud but otill Hable for the resulting lasses in their branches.
For the reasans set aut below, Eek fraud by branch staff can be easily detected by a
Subnostrnacter befare any faas occurs se fung as he/she is carrying out groper end of day
checks on P&A transactions. Subpostmasters are therefore bable fer any isoves in their
branch caused by Pia fraud a ths loss arises due to ther fadure to conduct adequate
checks,
Benefit payment methods
418.3
TEA
185
15.6
There are various methods by which benefits can be received by customers:
‘A books
BEd books were provided by the Department of Work and Pensions (YP) te customers
entitled to benefits, A nominated Post Office branch was set cut on the cover of gach PGA
hook, together with the custorner’s name and address. Within each back were {us
dockets, vouchers or foils (referred to in the Reply as vouchers) stating the FAD code of the
nominated Post Office branch, voucher nernter and amount ic te paid The vouchers were
presented to the branch staff. processed through Honzon and then cash pari to the customer.
The vauchers were despatched each week by sach branch to the Paiet Order Unit fyhich in
effect s the DWP) is Lisahally, Northern freland.
PGA books ceased to bec used in crea 2005 and were replaced with Poot Office Card Acco:
Post Cifiee
POCA is a imited service bank account that only ailews benefits te he depasited inte the
account by DWP ari cask to be witheravers ndrawats ave coreducted’ by the nuctamer
taking br POCA card intc a Poot Office and withdrawing m cach either some ar all of the
benefits withie his, 3
4
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Green Giros
48.
48:
7
By
Customers who lose their POCA cards or customers who are on temporary benefits may be
oe nt Gros by the DWP.
These are chegues (aise knows as DWP cheques) which set out the payrient amount and can
be cached in the usual way, These cheques are date stamped and retained by the Past Office
after paying the customer. They have historically been accounted for and despaiched by each:
branch weakly te Alliance & Leicester, They are now seat to Santander (both beaks are
referred ta in this note as Santander for ease of reference), Green Giros should not be
onfised with Giro Payments which are an entirely diferent product.
PEA fraud
16
15.
4S,
9
uu
4S
Pid fraud eoxompasces @ cumber of different tyes of fraud, sere of ednch are bistorical
due to the change in payment methods aver
er recorded on Honzan, the hranch choutd take fromm
nef payrnent to 8 custo
ihe customer the associated PSA voucher or cheque and remit each veeek all vouchers to the
DWP and all Green Gire cheques to Santander. An overclann accurs when the branch records
ahenelt payment on Harer: but does not reat the ascocutted voucher or chaque. Without
the voucher f cheque POL cannot recover the payment from OWP / Santander, i planes @
oss on POL which
then gassed ic the branch by wav of a Transaction Correction lormerly
an error notice, but referred to in this ninte aa a Transaction Correction for gase of
nasy to identify ag the branch must record the remittance of
sor cheques out of the branch
fgon and therefore it is passibte to identify any
mmisaing weekiy remittance.
be commatted by recarding fake benefit say-auts on Horizon, va ones the
‘orded to be in the brat Horzan assuraes the
ob has been passed
Wg voucher / checgue
8 shart farm surpius {until the :
discovered and a Transaction Correction sent through} which can be used te cover other
aa
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fasses or removed from ihe branch ai the end of trading periad (assurmuig that there are nc
other offsetting fusses!.
Reintreduction fraud
S12 Renteaduction fraud is a more sophstinated version of averchaim: fraud wherety the false
benefil pay-outs are disguised hy the «plimission of duplicate paperwork,
36.44 fn reinteeduction fraud, Jlimate benefit, pay-out i recorder as Honzan wi
rash being
paid to a customer but yath the corresponding vaucher / chegue not being date stamped or
remitted cut to DWP / Sant,
Ata later date {typically the follavang week), the same
benefit pay-oud i recarded agair: om Harivor. This me however no cash s paid to a
customer (as the ne
eset) bul the prevings voucher / cheaue 5 dat
at the later date and remitted ta DWP / Sentand
Met 1 TIOt
4545 For exampir, int week 2 there would appear to he art avercaim farnuunt caamed but rio
sprresponding voucher ar chexue). arnnuat would be clabried again
submitting the cheque ar voucher from week 1 {by this time date-stamped). The iraud is
gremaed on OWP / Santander not spotiing the rassing voucher or cheaue in week 2 or the
reintroduced voucher / cheque im week 2. However, in pracice, each voucher / cheque has 4
ueque reference number whith silows duinnte paperwork te be ienbfhext
15.36 Each of these frauds aken dace bath befpre the mtraduction of Hoeizon and when
Horizon was m operation i: Po 2 brat or: timated iesue, Ita
aise largely an histaric maue as most benefit payrnents are now through POCA: twhich are nat
susceptible tp the above
‘auds} although come Green Giro Chea. Hi processed in
branches,
Fraud prevention in branch
15.27 chasid be noted that “overe and “reintyoduchans’ will nat cause 3 loss te @ branch,
Thay gene 4 cash suephis, which 35 long 33 the cash had mot been rernoved fram the
branch, vali off-set any later Transactier: Correction.
15.48 it was historically and remains open to & Subpastmaster to carry aut immediate checks for
PSA fraud as a Subpostmaster ¥ ve Ae
aod {x} that week's r
ass to (each week's batch of cheques/vouchers
eronds af PLA transachons as recorded on Honzun. it is therefore
&
a
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possible for Subnestmaster ta eacily confirms that the value of the cheques and vouchers
being rernitted sach ween reatch the value of benefit pay outs recorded an Horizon. This
would reveal any avercaimes of remtroductions,
TEA For this reason, Post Office dues nat consider that a Subpostmaster could be the inmiecent:
vi of P&A fraud. if a Subpostmaster does not follew the proper process for rernitting out
PSA document: hereby fails to stop any qverciairns ar remteaductions at source, they set
are tiatde for any resulting iesses
46
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Past Office's response to section 16 ~ Surmtuses:
EA Section 16 af the Repart considers Fast Office's approach towards the surphices that ray be
generated yathin branch.
26.2 &s stated at paragraph 14.4, the contract between Post Office and Subpostrnasters alicws.
surpluses to be vathdrawn provided that any subsequent charge is made quod mnmediately.
This means that Subpastmasters may retain surpluses that may be generated. The repori.
canfirens, correctly, that Post Office views heth surpluses and deficits as discrepancies.
However, the Report makes the incorrect conclusion that Post Office are not ae concerned
yath diecrepancies a3 they are vith
463 Whenever Post Office dacovers a ceacrepancy that can be altedbuted to an error 9 branch,
whether ites a surplus or a deficit, t wil generate a Transaction Correction te carrect th
Dranch’s accouris
46.4 Where discrepancies occur in branch (say at the end of a trading period where there is a
is for the Subpostmaster to dispute the discrepancy.
surpluses.
46.5 The system processes sx rfion transactions even working day. Post Office anly mwestigates
a disrrepancy in branch if the Subpostmaster requests assistance ~ it does not investigate
avery discrepancy Mentified in a branch's accounts:
a First, mast discrepancies are fairly small and se de net warnant a fail Investigahean
unless the Subpostrnaster raises an tesize.
b. Secondly, the sheer volurne of discrepancies would make investigating ther ali
unworkable
e Thirdly, where a discrepancy anses mn branch (ie. the cash on hand does not match
the cash figure on Horan) an investigation will require close Involvernent of the
Subpostmaster and their stalf as anty they wall know how the branch has vansacted
its business.
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16.6 The Report's conciuiston that Post Office j acerned with surpluses « therefore sot
carrent. In arty event, itis nated that this topic does not give rise to eny thernatic issue that
indicates the Post Office ar Horizor: is responsible far insces caused mm tranches,
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Past Office's response to section 1? ~ Caunter-errors that benefit customers at the expense of the
Subpostmaster
174 Section ‘17 of the Report considers occasiins when customers may benefit from certain errars
in branch to the detrirnent af Subpastmasters. This section dees nat give nse te any thematic
issue but rather appears to raise 3 senes of discrete poms,
fey
-
he
Paragraph 17.4 of the Report highlights that mistakes can occur when a counter clerk presses
the “Deposit” icon rather than the adjacent “withdrawal” ican. This errar by a Subpostmastes
fait would have t
effect of doubly the size of the erray {as the bran
the receipt of money into the branch in the accounts which increases the recorded cash
pasibon but wil have also handed over cash to the custorner thereby lowering the amount of
cash m the branch}.
n the branch,
473 Past Office agrees that this error may occur but that this would be an error wi
not @ systematic problem with Horizon. Ir the: metances the Subpostmaster wapid be
fable far the error and any toss that has been created in accordance with section 12, cause
12 of the Subpostrnaster contract.
Paragraphe 17.2 and 17.3 are a repetition of the issue raised i: section 19 ~ te ws
BPS
Post Office's corarnents un that section.
Paragraphs 174-478 are a repetitinn of the issue raised at paragraph 10.1 ~ to which see
Post Office's comments or that section.
4S
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Past Office's response to section 18 - Error and fraud repetiency
384 Section 15 of the Report considers whether Hi
si
8 sulficiently errar and fraud repetient.
ira Heats
a Has Post Office su upgraden and develaped Horizan over time?
b Ones Horizon ancurately record transactions pronessed in branches?
cd ig Horizon resistant to power arid felecommurticat
Bi Horizon work far every single user ne matter their competence?
Developing Horizon
The Report states that Post Office has nat oufficently upgraded and develoged Hangar aver
sa that ther
the y a shuatan whare "erers and Fatal that could po:
bly Rave be
desagned out of the systert did not happen, As @ result, the Repart alleges that
that could have heen aunided.
Subpostrnasters have been Hable far josss
1823 Asiusior: iS unsupported by any eudence and ig incorrect,
38.4 The Repart contains no fysis of the development of Horagn over the years. Its unclear ar
what basis the Report conaders Honzon te be under-developed when there has been no
for resaeeirny 3 apraving Horzon or of the
upqranies that have bee:
The Report references a cingle exampia to aunport its opinion:
“184 Ags
example is an issue thet has been cused by Appicants in regard to Giro
transactions. Tiss reistes to Horizon o,
ing in Recovery Mode, for exarripie
fofovwing power ar telecamnmunizetians fafures shat resulted in the Aranch terminals
fosezing. in these situations ihe system gaes thraugh a complete reboot, then, when it
Aas finely rebooted a message aaprers on screen asking “Wo you need io recover any
inne transactions?”
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18.6
8
A few Applicants have reported. when faced with that guestion, they usuaily ded not
bos
ee
dave sufficient information to knave vdether ov nol the system needed to recaver any
Giro transactions, if they resporsied in the affirmative, the system asked for the detads
of the Gire transactions thal needed te be recovered. As the user did not bave the
relevant details te band fend could nat access the data as Herzon was
tik completing
us reboot process) they were forced inte responding m the negative and haying that
was the correct response. Ties often resulted in the vorang’ answer being entered and
transaction errors being gereratest’
its noted that this example does not include ary suggestion as te the amprove! if f°
upgrade that could have been implemented by Past ce to ailewate the above alleged issue.
ample does not thers agpert the conchision reached in the Report,
Fost Office in fact has a number of processes in place for regularly reviewing and imeroving
Honan, These include:
a inadent and Problem Management processes, Both of these processes ensure that
where a branch reports an issue it is investigated and resolved. Where several
Instances of the sare issue occur, then a problem record is created and the raot
cause of the issue is identified and fixed {ie to avoid further instances). The resolution
of problens can comelimes be miner amendoients fo processes or can result m &
change to the software code via ihe next release of negeaded softwar
b. Operational reviews with Fujitsu, These ishe place on a monthly basis across
number of different specialist teams in both Post Office ani Fujitsu. The purmose
monitor and review past performance, addressing any issues as required, and to
prepare for known changes or upcoming events.
Operational reviews with the NFSP. These have been in place for over 10 years and
have operated on either a monthly or quarterly basis across this period. It has
awelved the NFSP Execuives meeting vath senior representatives from Pout Office's
1 Service, Network and FSC tea
these mretings and actions taken to resolve and irnprave either Horizon or associated
8. & number of aper: sues are raised Vie.
processes Other systerns are alsa discussed as and when relevant eg ATMs.
53
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a Continuous Service improvement. This is a standard process that Post Office's IT
Services operates with ail ofits supphers Post Office considers that Fuptsu are
parbadarly geod ir: thes area and have over a number of years devetoped and
inteae
ia rember of impravernents, This has inciudedt Fujitsu, hy their owre
initiative, providing additional fimds to be tused by the Post Office for impravements to
Horlzan, Fi were rigt contractually obliged ta do this. The appreach agreed wath
Fugitsu was to use NPSF’s input to drive the improvement initiatives, Through this
precess and the tri-garty working, including NFSP rapaihers’ active involverneat i
conduchag demonshnatans anit fest
sulted in Eripravements < y driven by the
NFSP and funded ay Fu
38.2 Ultimately, the Repart appears te agree with Past Office's poaihan in that t ctates at
paragraph 18.8 that "a 7
ber af enhancements have been made to Horizon following
experience anit feedbact Whilst specific examples are not provided a5 evidence. hows
that Post Office ip engagest in evohwny ite syaterns fa emprove user Enz
2
Accuracy of capturing transactions
TSG At paragraph 14.9 the Regort states that, oginion, for Horizan te he “Af Air purrose
for all users 2 needs te record and process a yale range of products and services offered by
Post Office aed to @
ble Subpostmasters te investigate any cause of issues that may arise.
se Regort conchuides that from the cases reviewed,
ithough ne cpecdi¢ examples are
provided, that although the core software of the system works i may not prowde an ideal
user expenence for jess IT literate users.
2840 Horizeras capable of capturing ail information and pracessny all trarcantions 4
ised properly
ghhghted in the Resort. Further, ou exarnples or exptanat!
are provided te cuggest that Horizon, if operated in accardance with stand
ard Opters
procedure, would not accurately capture transaction data.
i
ct, af the cases that have been fully reviewed so far. oot one has presested aoy
whatsoever that id riot a dely record the transact assed by Angiicants or
them staff,
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918.42 Horizon ts designed to ensure the acy of transaction data subautted from branches.
Safeguards are in piace te ensure thet no transactions are fost, altered ac improperly add
te & branch's accounts:
3 Encryption. Transmission of transaction data between Honzen terminals and the Post
Office data centre rypted.
& Net to Nil. Baskets? rmust net to nd before Wansrassion, This means that the total
value of the basket 1s nif and therefore the cx
yact arnount of payments, goods and
seneces has bert transacted ~ as Hy vaiue of goods sad service shavid alveays
balance with the payment (whether to or from the custorner}, Baskets that do nat net
to nd wail be rejecter by the Horizon terminal before transmission t Post Office
data centre.
No partial baskets, Baskets of transactions are either recorded in full or discarded si
rded,
full rio partial bask
8 be
a No missing baskets. All baskets are given sequential nuntbers (call arnal
Sequence Numbers" or JSNs) when sent frorn 2 Horzen terminal. This allows
Horizon to rurs a check for missing baskets by looking for mssing JSNs bwhich triggers
ar ery process} or additional baskets that would cause duplicate nurnbers (which
would trigger an exception error report to Past Office / Fujitsu}
& Secure data store. Transaction data is stored on a secure audit server, Al
transaction Sala 1s dig sealed ~ these
evidence af tanw
‘ing if
anyone, either nadvertently. mitentionally or malicicusty. tried to change the data
within a sealed record
45.42 ie summary, Post Office rernains cosfident that Horizon accurately records trarsaction data
and the Report presents no evidence te change this conclusion.
Power and telecornmunications failures
48.14 Paragraph 16.10 says that for Horizon to be effective, the systern must be able to operate in
areas where power ard telecarmmumcahans retabdity is a profdern, Its noted that the
Report does not offer a view on whether Horizon achieves this standard.
* See paragraph 7 15 of the Part One Sniefing for an explanation of “baskets”
ce
ay
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pe
e
yo
ws
For darty, Post {fice maintains that Horizon i negate of handling oawer and
telzcammuriications problerns.
$8.46 In Post Office branches, Subpestmasters are responsible for power supplies and the cabled
Regert), Interruptions i
There are
Following a failure to contact the Data Centre and co:
fate a transaction, the systent
would automatically carry out 4 retry and attempt ic save the backet ta the Date
b Following the failure of the secand . 8 message displays te the User morming
them that there was a fadur act the Data Centre and asking thern if they vesh
to Retry or Cancel. Its recommended that Users o tetry” a maximurn af trace.
‘, When the User selects “Cancel” thr results in a Forced Log Gud. Thea means:
i Horizon would cance! those transactions that could he cancelled
ae Herizac would thes print aut 3 copies of a [isnonnected Sessior
for the custornes, one for branch records and ane te attach te th fg aid
with recovery}.
H The receipt would show transactions that are either recovered ar cancelled, eo
Those peaducts considered reco be settind with the customer i
accordance with the Disconnect
w Ha transaction is cancellable then atock should be retained by the Branch.
¥. Harizas would then log aut the active user,
a. ‘The Subpestmaster chavid then make sure that, in accordance with the Disconnect
Receapt, the Customer is provided with any funds d he returned te thern in
accordance with the Disconnect Receipt.
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a The system would the:
fisplay the Lag On screen. The User may thes
ftemgpt to
Log On aga
part of the Log On process, the system checks the identity of the last Basket
he Data Cente
if identity of the
successfully sav and Carnal
va
Basket successfully pracessed by counter, if the last basket saved in the Data
Centre has 3 hyher number than that considered 6 be the last successful basket
precessed by the counter, the recovery process at the counter wouid then repeat the
55 that the counter had carried aut af the point of failure.
& Recavery recemt would have been printed reflecting these transactiens.
“
h, A message « displayed to ine user confirrning that the reco
ry is complete. They
then return to the Home screen, Depending on the transactions be:ag conducts
the time, the user rnay be askerl a senes of questions fc complete the recavery
process,
TS 47 Jess poten that a Secored Signt's Iterim Report iast year, if opecificaily tgoked inte ths
recovery proce wing a telecormmmunication ure. Second Sight found that the
renovery process worked bul questioned the speed of the responce frorn Honzan. As far as
Post Gffice is aware. this conclusion is yaltd and has not been revoked by Second Sight.
18.18 The Part Two Renart st cur when
es that there are caves where errors are more hkely to oc:
unusual sets of creumatances and behaviour are present. It is not cigar what these
circurmatances or, in particular, the hehawaur is and s6 Post fiffice cannot comment on this
lune of enquiry
Fitness for ali users
28.19 At paragraph 18.14, the Report notes that there are some people who are unsuited from the
putset to using a computernsed branch. It1s nat understnad haw this relates to the queshan
af whether Horzon is r purpose. However. in general there is an effective recovery
process ip rnanage paver and telecornraunication failures.
¥8.20 Horizon is operated by thousands of Subpostrnasters, the majority of wharn have net had any
rague with the system or the effectiveness of it. Whist a small number may find the operation
ae
on
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erital
af the syatery uit, this dees not make Honzon not fit for purpose. The subjecteve
of afew
people ic nat evidence that hhentively not fit for purpase
For this assessment > be carned out the Report would need to identify
benchmark against which te judge Horizan, Aisa, the phrase “fitness for purpase” has &
specific fegal meaning and is therefure a subject on which Second Sight has no expertiae to.
offer an opinion, The Report does not establich ar seek te articulate any legal or mdustry
mark and se ny evidence oF any Pobust analysts
Fe UNGUTDGTTEG
Punt Office maintains that the fact that over 680,000 users have used Horizon since its
TES have raned a coroplainh te the Scheme chavs that dt fit for
igveghian and ont
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Confidential
Post Office's response to section 19 ~ Gne-sided transactions
49.4 Section 19 of the Report comments on what it cals “one-sitey trarmactions’ Are
transactiuns that the Report states have not fully compteted all the constituent parts of the
vvansactinn, This is either bes there has bees a charge ty the oe
ner for gonds or
services but they de not receive the gouds/service. Alternatively, a transaction processed
but the customer's bank account is not charged for the purchase.
19.2 The Report speculates that these situations could, somehow, give rise to a loss to a
Subpastmaster. Thus far Past Office has not been presented with any evidence that there is
a general issue with Horizon or Post Sffice’s processes that could qive rise ta the above
scenario.
Feguards
19.3 The Report suggests at paragraph 19.2 that one cause for a "aw sited transaction” ts due to
4 telecornmunications failure Post Offire accepts that telecornrnunications issues can give
rise te “one-sided transactions. This is an inewtable rich of Lransaciing husiness across the
Internet and affects ali retaiers and banks. Also like al! retailers arid banks. Horizon has
recovery processes in place to rectify any “one sided transaction errors. These safeguards
are specific to particular prada
¢ 1s not possible te explain then ail i ane docurnent,
394 Communication failures can have two bread impacts. The main mipact would be the type of
ts thal are referred te ab p
interruption that & addressed by recovery p
this Reply.
avagraph 18.46 of
19.5 The other irapact (which would affect the customer. not the Subpostmaster) would be where
a debi
ard payment was interrupted after the bank had ring~-fenced the custamer funds for
the payment but before the counter confirmed that the transaction was corngiete. This can
lead to a situation where although there is ne issue fer the branch accounts, the custemer is
na longer able to draw down on funds in their bank account because they remain ring-fenced
for the original atternpted transaction. Barks have routine processes to clear down ring-
fences within a caupie of days or on an accelerated basis by specific enguiry. This would net
affect brar CONES b
of cou
lead ty custorser cormplamis te their hanks.
5?
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No risk to branches
19.6 From a bran: arse from a one-sided transactian as the
5 Perspective me discrepancy
branch accounts are based on the information received by Honzon ane not on the inforrnat
held by a third party client.
49.2 if a transaction s recorded ay completed on Horizon, then the accounts will isa have
recorded a corresponding payinent from the customer or the haruing aver of cach or stock to
the customer.
if Horizon: records the transaction transaction wil not cornglete on Horizon
and no payment, to or from the custamer. wil be recorded. Likewise, as Horlzan records the
frosactun a5 faiied, the branch staff should not hand over any cash or stack te a custorner,
19.9% Regardless of whether the client's IT system recerd a completed transaction or nat, the effert,
of the above is that the branch accounts will be wi balance. The fact that there may be a
ds crepancy bebyeen Herizan and the th i
ed party chent’s records dues net, aso:
ed above,
nage the branch
ancawrdeny positiart,
Branch awareness of this issue
UPLG At paragraat 2-19.6 the Repert states that the only way a one-sided transaction would
be discovered is df the customer was to re aranch, The Report yors on to suggest tat
where the customer has benefited fram the transaction lie they have received gaods which
they did not pay for} # nat say anything. Therefore the
eran? the customer digzlosed it,
Subsestriaster w
the reasons slated above, this view is incorrect and, it any event, irrelevant a5 4 br
Hi qaver he labie for an 2
caused by a “one sued f tio’
Canclusion
LE ts f this
mnraty. whilst the Report has yet fo grove tha .@ thernabe
He Of BE?
application, Post Office has dernoastrated that a “one-sided transacted’ cannat give re
juas to Subpostmasters.
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Confidentiat
20.4
20.5
Post Office's response te section 20 ~ Hardware issues
Section 20 of the Repart makes same general comments and observations about Horizon
termunals and other assoriated branch hardware. However, the Repart does sot present any
evidence to support its speculations nor does it clearly identify any issues that may be
common to many Applicants within the Scheme.
Post Office accents that hardware problems cae arise and that equipment is replaced from
tinns to tims
However, this is very dependent on the crcurnstances of an individ
does nat give rise to a thematic issue.
Further.
‘he Report does not attempt to undertaken any forrn of statistical lysis or industry
benchmurhing. Is this area, iL would be common to see an essex! fof “ronan tare:
between faik BS 8 way of ludging performance.
in any event, as described at paragrapt 19.6 of this Reply. there 3 a recovery process in pie:
to manage hardware fail
Paragraph 20.1 of the Report highlights that some Hodaan exugir
old. Whilst this may be
more than 10 years
reel, there m nothing ic show thet the age of the equipment s a
cause of ary
At paragraph ZD.2 the Report states that there is litte routine hardware maintenance. Ths is
correct but equipment ts replaced as and when needed and this is industry standard practice.
Paragraph 2
responsible for the iosses suffered.
states that many Applicants bekeve that ty equipment could be
This is not correct and no evidence has been put forward
%® support the view that hardware issues have caused losses in branches.
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Confidentiat .
Post Office's response to section 21 - Past Office Audit Procedures
24.4 The Report says al paragraph 214 that Apghcants were not provided with capies of audit
reports, although it dees acknowledge, at paragraph 21.2, that Post Office's currant prachce ss.
te
g
tovide each Subpastmnaster with 3 copy of any audit repart. However, the practice of
Jiding a Copy of the audit repart has abyays been in place.
Posi ice 9 not aware of Aotdicants not being provided with copes of auckt reports when
requested however Past Office cannot categorically day that thes has caver happened in an
individual case Nevertheless, the lark of access ty an audit report is not a cause of Insees in a
Deanch and waudd not exanerale a Subpostmaster from their contractual responsitnity to
ae geod locues caused in their brand “were revealed by art agdil,
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Post Office’s respuinse to sectipn 22 - Post Office lavestigations
Paragraphs te 22.8 Serand Sight’s opinion an the prac
Report pro
undertaker by Past Office when it investigates creminal activity in branches.
G2 Thus toyuc is oubude the scope of the Scheme (which is to conmder “Herzen and associated
. 83 Jorensic
isgues") and is also outside the scope of Second Sught’s experting, Sectoral Sigt
nit on Post
accountants and ned criminal lawyers, are rot quatified to <
prosecatios procesaes
‘This ia fughtighted by the statement in the Report that the focus of Post Office investigators i
to secure ar admasion af faise axcausting and oot te conser the cuot cause of ary losses,
This is incorrect ~ Post Office mvestiqators first job is to estattish what has happened on the
franck,
224 &% expiamed st paragraph 3.7 of thea Kenly, by faisifing the acoounts fohiether through the
inflation of cach on hand or otherwise) Subpostmasters or their assistants prevent Post Office
from: being able to identdy the anuactans thal may have caused discrepancies aad losses.
‘The first step in dentifying @ genuine error is ta determine the days on which the cash
pagiben in ibe accounts o ddfererd from the cach on hand, Where the cash on hand figure
has beer faisely stated, this is nat ncasble
22.5 The false accounting therefare hides any gen errors from Post Office and a
Subpastenast
Office is not able to wdentify which transactions may have caused the losses. The Repart is
at the tirne the loeces accur and it remains the case now that Fost
therefore entirsiy incorrect in ts evaluation of baw Post Office agpraaches prasecudans. it ie
the Sahpastymaster’s for their acaistant’s} faise accounting that prevents Post Offic
ay
investigating the underlying losses sot the attitude of Post Office investigators.
we
NS
>
Given that this ta toydc on fy Secand Sight can offer no expert apinian, this Reply dees
not comment on this section of the Report alte rrp that it rejects all the Report's:
findings wn it,
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Metadata
Bast 2rapet NAL EpE I GRIGINAL!
TFilenane 18,82 Resnanse iaGencod
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ANNOTATED AGENDA FOR SECOND SIGHT
30 SEPTEMBER 2014
Attendees
{ Post Office Second Sight
Chris Aujard Ron Warmington
Belinda Crowe Jan Henderson
Rodric Williams Chris Holyoak
Andy Parsons
David Oliver J
Aims for the meeting
1. Commercials - new fixed price linked to productivity
2. Scope - Second Sight clear on the limits of the scope of their engagement
3, Quality - Ensure SS understand that they need to operate as professionals engaging properly with the Post Office
team and building the product quality from now on
1. Rate Of Delivery
SS told BC that they plan to clear backlog by October {producing circa S a week) and then revert to 3a week. Ron
has stated at WG and again to BC that under no contractual obligation to produce 3 reports. We need to place
them under one. SS productivity high last week at 6 draft and 1 final reports
* Even with last week’s spike (6 drafts and 1 final) you are only producing 1.9 a week {prior to that 1.4)
* Rate of delivery has been unacceptable as is repeated insistence you are delivering when you are not.
© Stated you are not under contract to deliver 3 cases a week — we will need to change that
* Think fast face to face meeting showed that where there is no evidence you just need to write that up and move
on.
2, Cost of proposals
Second Sight proposal of £3500 per report including, historic average report cost circa £5000. The split on which
cases the piece rate would apply to was provided last night and at first sight appears reasonable.
* Cost has been high and proposal is still substantially too high
* Board and finance have agreed the move to a piece rate from 1 September
® Also worth noting that our press office have received an enquiry about the terms under which your services were
procured,
» When engaged we expected a quality appropriate for an independent expert
* Utility of your reports to us is limited — not helping parties in mediation at ail ~ needs to assist at mediation not
general comment
Counter Proposal
® Willing to consider Fixed fee of £2500 a report
* But must be linked to rate of delivery, only invoice every 20 final reports produced, must produce 5 per week to
qualify for full fee
*® 15% of the fee retained until Post Office agrees satisfactory conclusion of SS’s engagement
® (£20K bonus payment for successful completion and termination of all Second Sight work by 30 April 2015.]
3. Work Product
This is the opportunity to pin down all of the scope issues around the work for MPs and ensure Second Sight are clear
on what they ore contracted to deliver and what they are not.
® Not paying for any MPs work - you are engaged as forensic accountants to review cases in the Scheme
* Ifyou think that issues need further investigation then we need an investigation plan that:
* identifies {ie clearly articulate) the issue
© Set out your steps to investigate and reach a definitive conclusion
Set out how you will report the opinion
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Set out the time to investigate and report
Specify your costs for doing so
Even after all that though you may not be the right horse for the course
And you should note that we may need to procure it in any event
eee
Workflow engagement
5S engagement has been poor since 2012. They have failed to engage properly on the facts of coses and have
been difficult to pin down to meetings requiring senior escalation. SS quality has consistently follen shart of
expectations in both case reports and other reports.
Been very disappointed in the manner of your engagement ~two years you have failed to engage with the team
‘on the substantive issues such as our feedback on your case reports
This influenced the quality of the Part Two report which { was very disappointed in — unacceptable that we had to
send out a 60 page response due to the inaccuracy of your work
Also the quality of case analysis has not improved and frequently lacks intellectual rigour and logic ~ little proper
evidence or critical reasoning and a worrying tendency to appear willing to be swayed easily by less than
compelling and un-evidenced assertions or special pleadings, including where these contradict the findings of a
Court process, eg M052 where you are suggesting we mediate as you now believe the applicant committed
perjury, contrary to your initial conclusion
Also now Part Two complete it appears to being used to provide un-evidenced solutions where SS have not been
able to find the cause of the loss
Tone in which you engage with the team is unacceptable for a professional service provider — expect it to improve
from now on
Very concerned about your behaviour at the last face to face meeting around your so called “thematic 18” —
which is not a neither thematic or true. We will writing to you formally following the meeting along the lines of
this draft
AOB
Canfidentiality Agreements for two new staff
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Briefing Paper: SS Engagement 30/09/2024
Background
On 24/09/14, SS were sent a letter inviting them to attend a meeting on 30/09/14 to discuss concerns
surrounding their delivery of services to Post Office and the Working Group.
Areas for concern included the quality; rate and manner of delivery; and value for money. A face to face meeting,
for which this brief has been prepared, is scheduled for Tuesday 30 September 2014.
‘The following provides evidence for the points raised in the letter.
Rate of delivery
1) At the Working Group on 12™ June, SS confirmed they would deliver a minimum of 3 reports a week with an
increase in production to be expected within a few weeks of the meeting.
1.1 In addition, on 1" july SS signed a letter of engagement. This included a commitment to conduct services
provided “in an efficient manner and with a view to ensuring that the costs of the scheme are reasonable”.
More than 15 weeks have since passed,
28 draft CRR reports have been produced, at an average of 1.9 a week ,
Only 3 times have SS managed to produce and supply the number of reports they committed to - despite telling
the Working Group on 11" September that they were doing so,
At the last WG meeting they admitted to a seven week backlog (16.09.2014).
Looking at the first ten CRRs produced:
SS invoices show that prior to making the commitment on 12" june, SS had already begun work on five of these
reports, Thus, SS should have been in an educated enough position to understand the level of work involved in
producing a Final CRR and the likely timeframes involved. Despite this:
They took an average of 11 weeks to produce from the time the Post Office Investigation Reports were shared:
seven weeks to reach Draft and an average four further weeks to reach final.
They were subject to an average three weeks slippage to reach draft, and two working days slippage to reach
final.
However, it should be noted that most recently SS have produced:
1 Draft & 7 finals for week commencing 08/09/2014,
3 Drafts & 3 finals for week commencing 15/09/2014,
6 Drafts & 1 final for week commencing 22/09/2014,
At the last WG meeting SS explained that they were now in a position to reduce the backlog and they expected in
future to produce 4 reports a week and definitely no less than three.
Cost of proposals
2) Discussions around perceived value for money will likely focus on negotiating a piece rate for CRR reports
going forward.
2.1 Again, referring back to the letter of engagement, signed on 1° July - this included a commitment to conduct
services provided “tn an efficient manner and with a view to ensuring that the costs of the scheme are
reasonable”.
To date, SS have invoiced PO £650k for work undertaken within the scheme,
yee
Lad
ve ase
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The average cost of attributed to in SS invoices #86-93 for the production of the first ten final CRRs is £4.5k per
report (though this is likely to be an underestimate due to gaps in invoice data),
This equates to an average of just under £1k per page.
2.2 Second Sights Commercial Offer
Background
Second Sight will charge Post Office a fixed fee of £3,500 for each final CRR delivered to the Working Group (to
include the delivery of both draft and final reports).
The fixed fee will be inclusive of participation at weekly conference calls and monthly face to face meetings
Out of pocket expenses will be charged at cost.
The fixed fee proposal will apply to all new CRRs where work starts on or after 1 September 2014.
Normal time and cost fees will be charged up to 31 August 2014 on all cases and subsequently for CRRs that are
Work in Progress as at 31 August 2014.
Second Sight will absorb the costs of Kim Evans for the month of August 2014.
Comment
In the letter we have indicated the proposal is too high and productivity needs to be linked to fees.
Proposed Counter Proposal
Fixed fee of £2500 a report — this takes account of the more junior resource being brought in to work on reports —
which should result in a lower blended rate
Agree the fee should cover Working Group participation and preparation.
Out of pocket expenses at cost
Any request for further work on a time and material basis must be submitted in writing to the General Counsel
and must have specific prior written authorisation from the Post Office before work commences
Invoices only to be accepted every 12 final reports completed — this should be every 4 weeks.
15% of the fee retained until Post Office signs off the satisfactory conclusion of Second Sight’s engagement
£20K bonus payment for successful completion of all Second Sight work by 30 April 2015.
5% reduction in fee per report not delivered at the agreed 3 per week schedule.
Willing to review the cases commenced prior to 31 August 2014 - still awaiting a response to Belinda’s request.
RED LINE on unit cost
Not agree to any unit cost above £3000 .
No ability to carry out any work other than report production
Quality
3) The quality of the CRR reports have been subject to minuted WG concerns over their style and quality.
3.1 On 07/03/2014, the WG agreed SS reports (namely M001 & M014) needed to be revisited to (amongst other
concerns} “Ensure conclusions are reasoned and supported by evidence”
Despite agreement, CRR’s' do not provide detailed referencing for the sources cited - nor do they always provide
supporting evidence or reasoning to substantiate the points made. For example:
M022 states ‘Taking all of these facts and circumstances into account, we believe that Post Office should bear a
significant proportion of the responsibility for the losses that did occur’
M009 states ‘we do not find the argument by Post Office... particularly compelling.’
MOS7 states ‘we believe on the balance of probabilities, that the applicant was responsible for the loss’
M048 states ‘On the balance of probabilities we believe that the losses were caused either by user error or
theft...’
1 Based on analysis of the first ten CRRs - for which work had not begun prior to the meeting on 07/03/14
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No explanation is given as to how the probabilities have been balanced. This is despite, on the 13/03/2014 the
chair preparing suggestions for how could approach their work on claims. Guidance included “In giving its
opinion on disputed issues of fact, $$ should explain what standard of proof SS has applied, ranging from sure
to probable/likely”
Issues surrounding the quality of reports have however continued. For example:
On 1 May the Working Group discussed M022. A range of concerns about quality were raised at this point by Post
Office, including that:
The Applicant would need the Part One report,
The depth of analysis was not sufficient,
A clearer articulation was needed of the factual basis upon which conclusions were made,
Neutral language needed to be used,
The evidence used needed to be clearly balanced with any counterpoint brought forward,
Un-evidenced statements needed to be avoided,
Raising real or implied questions needed to be avoided,
it was going beyond SS’s areas of expertise.
3.2 CRRs also provide limited (or no) explanation or evidence for why a case is suitable for mediation, For
example:
Section 6 all of the first ten CRRs recommend mediation. Limited (or no) reasoning is given and limited {or no)
reference is made to the preceding content in the CRR:
The explanations given in M006, M022, M028, M048, M076, M127, simply state ‘We consider that...’ or ‘In our
apinion this case is suitable for Mediation and the following issue should be considered’.
3.3 More recently, an ia! recommendation not to mediate case M052 in its ‘Final’ CRR was changed to a
recommendation to mediate the case in a version 2A of the report. This latter recommendation seems odd given
the detail included within the body of the report. Namely:
An admission and subsequent verdict of guilty to 11 charges of theft (with a further 23 taken into consideration)
at St Albans County Court.
Acknowledgment that “the expiry of document retention periods has resulted in it no longer being possible to
offer a fully evidenced opinion on a number of matters raised by the applicant”.
The argument for mediation appears to be based upon the idea:
The Applicant only pleaded guilty to avoid a potential custodial sentence,
The Applicant then concocted a story as to why she stole the money to persuade the court she was guilty and,
Had she not pleaded guilty, Post office’s evidence would not have stood up to scrutiny in court.
However, the ‘Final’ CRR (superseded by V2A) acknowledges that “The adequacy or otherwise of the Post Office
investigation process has no relevance in the light of the Applicant's guilty plea, since the evidence was never
considered by the court. Since this is the only substantive point raised by the applicant, there are consequently
no issues for us to consider. Issues relating to Post Office prosecution policy, and the conduct of any prosecution
and whether or not it should be deemed ‘safe’, fall outside of our (SS) terms of reference”.
The sentence in bold above, was removed from the CRR V2A.
Workflow engagement
4) There have been a number of incidences where 5S has failed to properly engage in the manner we would
expect of professional advisors. In particular, in relation to:
The spot reviews (ten reviews),
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The detailed briefing notes (four sets),
The feedback/comments provided on the draft CRRs (24 sets of comments).
4,1 Where revisions are made, they tend to reflect the more minor points of detail raised by the PO and do not
always (fully) reflect or acknowledge the more major and substantive points raised by the PO in their response
jetters. For example:
With regards to case M127, Post Office comment ‘...no evidence of theft or any other criminal wrong-doing has
been found.’ (Post Office Response Letter, p.10). The text of the Final CRR remains unchanged stating ‘It is
entirely possible that these two branches were subjected to such attacks, and Post Office's failure to investigate
either of the two substantial shortfalls... means that these types of external theft may have contributed to the
tosses.’ (M127, p.9). Although reference is made to ‘elegant techniques’, how such theft might work and why it
could reasonably be expected to have occurred is not explained.
The text of the Final CRR for M028 states ‘It is unfortunate that further steps were not taken at the time to
conclusively establish the cause of the losses. This appears to demonstrate a weakness in the support framework
available to the Applicant’ (M028, 9.5). This does not acknowledge or reflect the point made by Post Office that
‘The CRR daes not explain what additional steps could have been taken to establish the cause of the losses
conclusively. in fact Post Office went to significant lengths to investigate the cause of the shortfalls...’ (Post Office
Response Letter, p.10}.
Overall Recommendations
in order for the CRRs to deliver against what is required from the Terms of Reference and Scheme
documentation, it is recommended that:
The production of remaining Final CRRs are subject to cost, quality and timeliness control,
The level of assessment offered in the CRRs is increased, with the reasoning made clear and links provided to the
relevant evidence,
More detailed explanation is given as to why cases are (or are not) suitable for mediation with reference to the
findings in the report,
Explanation of alternative views is pravided and an opinion given as to which is to be preferred and why, os
The precision of the referencing and citations is improved,
Delivery is regularly measured against the Scope of Services and Scheme objectives,
The fevel of case specific detail in the supporting invoices is increased.
ENO
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Metadata
Filename [6.23 140930 Chns Award Post Call V2(1).docx [ORIGINAL]
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@
PRIVATE AND CONFIDENTIAL ~ NOT FOR ONWARD TRANSMISSION
Ron Warmingtan & lan Henderson
Second Sight Support Services Limited
iBy email) Se,
24 September 20%,"
Dear Sirs, ‘i &
Second Sight’s Engagement
. as
As mentioned at iast week's Working Group meetings it is vith, regal ‘that I am now compelled to
write fo you in connection with the meeting to whith yousSecond Sight, will be invited to shorily
to deal with the delivery of your services to Post ‘Offies and the Working Group. As you know,
the reason for my writing 1s that there bave Beene fumitier of events aver the last month
(ineiuding your firm's rate of progress in dealing with Case reparts and tha preparation of the
Part Two Report} which have given us:causefor congem.
Below I have sat out, in geraralterms, the matters that I will be covering in my meeting with you
nexi week, This should allow you, sufficient time to consider the necessary remedies. Let me ba
clear, Post Office in no wily.wishes to fetter your independence, findings. or opinions you
express, merely the manner in which they are being delivered.
4} Of most catwer ius has been the rate of delivery of your case Reviews. At the
Working Grou meeting en “42 June you proposed a Schadule for the dalivery of your Case
Review Reports. awhich the: Working Group endursacd. The minutes tacord that you “confirmed
that youwihstit he. dativaring @ minimurn of three reports 3 week with an increase in production
expected within afew weeks,” {lis now 14 weeks since that meeting and in that period you have
produced a total of 19 reports at an average of 1.4 4 week, Onty twice have you delivered your
target for @.week. The knock on affect for the prompt and cost effective resalution of the
Scheme is obvious. Equally, you committed repeatediy to deliver the Part Two Report in March
but we received it in August.
2) The manner of the delivery is aiso of concern to us. Thera have been a number of
instances where Second Sight as a service provider to the Working Graup, has failed to properly
engage in the manner we would expect of external profeasionai advisors. In particular, in
relation te the spat reviews (ten reviews), ihe dotailed briefing neles (four sats} and the
feedhack/comments provided on the draft CORRs fiwanty four sets of comments) you have fated
to explain why and where you disagree with Post Office in such a way that Post Office and, most
importantly, other readers can understand your perspective on the competing positians indeed
PRIVATE AND CONFIDENTIAL ~ NOT FOR ONWARD TRANSMISSION
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PRIVATE AND CONFIDENTIAL ~ NOT FOR ONWARD TRANSMISSION
when Post Office has attempted to schedule meetings with you io discuss substantive factual
issues of concern this has proved very difficult.
in future, I wilf expect a Second Sight Director to attend Post Office offices within a reasanable
time of a meeting being requested, just as Fost Office expects and receives from ihe other
professionals it engages.
Finally, Post Office has concerns about the value far money it has received from Second Sight's
services. Second Sight has been engaged continuously by Fost Office. During that time, Post
OFfice has invested a consierable amount of valuable time and resource toprovide Second
Sight with information, in some instances on more than one cocasion, te assist your
investigation inte Horizon. However, since 2012, aside from attending Working, Groupmedtings,
Second Sight has only producad twa. “thematic reports” and investigated atid: reported en
twanty five applications the utility of which have not yet been established: You have now
provided Post Office with a suggested new billing arrangement Jinked to taport.production and I
understand that you have discussed your thinking with my team, Hawng carried out a
preliminary review of your proposal it still requires further work. Thetrate is stilf tao high and i
will need you to link the rate of your case report production.explicitly to your fees. Please
respond to Belinda’s outstanding question this week so thatewe can discuss your proposal when
we meat
I realise that there are alvays two sides to evéry cain and appraciate you may have a different
perspective on thase issues but as yourslient,, albeit where there ara others interested in your
work product, our expectations are rot being fret “Post Office is nat looking io fetter your
independance or to undarnine Secotid Sight’s position, although the requirernent to be
independent does nat absolve you ofthe Fequirsments an you to deiivar to the Working Group
(including Post Office) the work which: youwre contracted to provide, and to report to and
engage with Past Gfice on the. mahagement of your services: tine, biling and quality.
hy
Yours sinvereiy
Chris Aujard
Generdl Counsel, Post Office Lid
PRIVATE AND CONFIDENTIAL ~ NOT FOR ONWARD TRANSMISSION
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2 MP
tive at the meeting and fran
the case work, ag do Second
roptiate for me to intervene:
for the Group and the Ch itis af course
Group meetings the Chair.
Paula Venneils
i Chief Executive
CC: Alan Bates, Sir Anthony Hi
www, postoffice co.uk
ind is seapsterodin Eoutaes cout ies. flegeten
evel te Bags Sc Bag a renteresi tava
PTRAHSG, Rewirtwrt Hw ARE Ae Strmst, Convene EEIY IMG.
eck Ge Lites
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Dear Jo
INITIAL COMPLAINT REVIEW AND MEDIATION SCHEME
lam writing regarding the recent media attention relating to the Mediation Scheme. This followed
the disclosure of a report in relation to the Scheme prepared by Second Sight. Although the media
coverage was minimal, I thought you might find it helpful if I provided you with further background
as well as brief update on the Scheme.
To that end, I attach a note prepared by Post Office's General Counsel, our lead member on the
Working Group.
As you are aware, the Scheme is overseen by a working group with an independent Chair. Given the
group's independence, Post Office has always maintained that the Scheme should be aliowed to run
its course and the business of the Working Group should remain confidential in line with its Terms of
Reference. Indeed our ability to challenge other stakeholders who do not respect that
confidentiality is undermined if we ourselves have not done so. The attached note has therefore
been drafted with the confidentiality of the Working Group in mind.
You wilf see from the note that we face a number of challenges relating to the Scheme. Whilst we
will cantinue to manage the impact on our stakeholders, it is inevitable that there wil! be some
public ‘noise’ as the Scheme progresses. And as Chris highlights, after over two years’ investigation
Second Sight have not found a systemic problem with Horizon and we believe this will continue to
be the case. We will need to stand behind the extensive work we and Second Sight have undertaken
investigating every case and defend our approach on the basis that we have acted impartially
throughout and in good faith. in particular, when deciding whether or not to mediate a case, we
must continue to be mindful of the need to properly protect both taxpayers’ and Post Office funds,
Jam very happy to brief you when we meet in a few weeks’ time and my team will continue to keep
your office briefed when any significant issues arise.
Yours
Pv
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Update on the Mediation Scheme ~ Current and emerging issues
Media interest
The recent media interest in the Mediation Scheme stemmed from the disclosure of the so-called
“Part Two Report” and Post Office's response to it. The Report is a technical document, prepared by
Second Sight as a streamlining measure in order to deal with (and describe) complaints, or themes,
that are common to a number of cases. The idea was that the existence of such a document would
enable their case-specific reports to be very brief.
In our view, the Report was inaccurate in a number of areas. tt also contained no clear statement of
the evidence upon which many of the opinions expressed in it were based, and a commentary on
matters beyond the scope of the Scheme and/or Second Sight’s professional expertise as forensic
accountants. As Second Sight failed to take on a number of our comments and corrections in the -
final Report, we wrote to the Report's recipients to advise them that we did not endorse it. in our
view to let the Report stand unchallenged had the potential to raise the expectations of applicants
unduly and confuse matters at mediation, In relation to Horizon, Second Sight’s general conclusion
is that the system appears to be fit for purpose for the vast majority of users. This is a positive
conclusion and is consistent with Second Sights finding in their interim report. However the Report
qualifies this by suggesting that Horizon could not be described fit for purpose for a limited number
of users (for example, those who were technologically inexperienced) in some limited specific
circumstances. Post Office has rebutted that qualification, as it is predicated on a number of factual
inaccuracies in the Report, and we do not accept that the limited capability of a smali number of
users leads to a conclusion that the system itself is flawed.
It is disappointing that this report was disclosed to the media, breaking the confidentiality of the
Working Group's praceedings. However, coverage was limited and we have now issued our
comprehensive response ta the Second Sight report to those applicants who received Second Sight’s
report. This has, so far, not been disclosed although as more applicants are issued with it the risk
increases. We have a media handling plan in place.
Scheme progress
Of the original 150 applications, 120 remain in the Scheme. Although Post Office has resolved 12
cases prior to mediation it is fair to say that progress has not been as fast as any of us would have
liked. Thus far, only 14 cases have been passed for mediation of which three have been mediated.
Post Office has dedicated considerable resources to the Scheme and we have now completed our
investigation into over half of the cases. So far we have found nothing in those cases which has
raised concerns about faults with the Horizon system, the safety of canvictions or Post Office's
liability for the losses being claimed by applicants. -
We are also working closely with Second Sight to try to drive up their output. However, both their
productivity and the quality of their work continue to cause us concerns.
Future challenges
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The fact that we have, as yet, found nothing to concern us about the Horizon system is good news.
However, this creates a number of challenges in relation to the Scheme and applicants that, despite
the confidentiality of the cases, will undoubtedly surface and attract some attention as cases are
concluded. Specifically:
* of the cases resolved, we have settled with a de minimus impact on our accounts and it is
likely that this will continue to be the case. This is at odds with the expectations of many of
the applicants, some of whom clearly expect large sums in compensation. However, Post
Office cannot and will not pay compensation where it bears no liability for losses claimed by
applicants,
© we are investigating all cases thoroughly, and continue to consider each case on its merits.
However, mediation is not the forum to overturn a criminal conviction. Post Office cannot
mediate cases where the facts have already been determined by the Courts and where we
have found nothing to cause us (or our criminal lawyers) concern about the safety of the
conviction. {t could therefore be the case that we decline to mediate any ‘criminal’ case,
around a third of the total caseload.
* each mediation costs between £20-30k and it would be wrong to mediate cases where
there is not, in our view, a reasonable prospect of resolution.
It is therefore inevitable that there will be a considerable number of applicants who remain
dissatisfied at the end of the process. Post Office’s position is that applicants will have the benefit of
a full investigation and Second Sight review of their case and will hopefully leave the Scheme with a
better understanding of the circumstances of their case than they had previously. It remains to be
seen whether this is enough.
We are and will continue to manage the potential fallout from the issues highlighted above. It
remains the case that Horizon is used by over 78,000 people across our 11,500 branches and
successfully processes over 6 million transactions every day. After what now amounts to over two
years’ investigation, Second Sight have not found a systemic problem with Horizon. If this continues
to be the case, and we have every reason to believe it will, then we will need to stand behind the
evidence of the extensive work we and Second Sight have undertaken investigating every case and,
whilst not being drawn on individual cases, defend our approach on the basis that we have
throughout acted impartially and in good faith whilst being mindful of the need to properly protect
both taxpayers’ and Post Office funds.
CHRIS AUJARD
POST OFFICE GENERAL COUNSEL
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[626 LETTER FROM PAULA VENNELS TO JO SWINSON MP 141014(1) pat
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Justice For Subpostmasters Alliance
Sir Anthony Hooper
Chairman
Initial Case Review & Mediation Scheme
148 Old Street
LONDON
EC1V SHQ 10" November 2014
Initial Case Review & Mediation Scheme
Dear Sir Anthony
1 am writing to you to convey JFSA’s concerns over the current position and direction of the
Initial Case Review & Mediation Scheme.
JFSA is now of the opinion that the Scheme has strayed so far from the original purpose for
which it was intended, that the few Applicants who have actually reached a mediation meeting
through CEDR have expressed such disappointment with the Scheme, that at least one
Applicant has withdrawn.
JFSA requests it noted that:-
1,
As has been stated on many occasions, it is JFSA‘s view that it is not the role of the
Working Group to approve which cases go to mediation for the following reasons which
are contained within the main document that each of the Applicants to the Scheme
received, Within it they were promised:-
« "Post Office now wishes to offer a Scheme to 0 Subpostmasters 2.that inalvidual
« “The purpose of mediation is to give each side the opportunity to explain their position.”
¢ "The Scheme /s being supervised by a Working Group comprising of representatives
from Post Office, Second Sight and the JFSA. The Working Group's role is to ensure the
Scheme is run in a fair and efficient manner. It will also be involved in making decisions
on how particular cases* should be managed through the Scheme. To ensure its
émpattiality, the Working Group is seeking to appoint an Independent Chairperson.”
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* The"*particular cases” are identified in the main document as those that "/f the
information provided by the Subpostmaster is insufficiently detailed or not clear,
or information is not provided promptly, it may mean that a case is not
investigated or mediated.” Or, “If there is insufficient information for Second
Sight to investigate a case, the case may not be investigated or may not proceed
to mediation.” — It is these cases, and only these cases, that JFSA is prepared to
discuss at the Working Group.
“As a result of this investigation, Second Sight will produce a Case Review summarising
its findings and a recommendation on whether the case is suitable for mediation."
“The Case Review should bring clarity to many cases.”
“What is Second Sight's role? - Second Sight was appointed by the Rt. Hon James
Arbuthnot MP and Post Office to independently review and report on the Horizon
system and any associated issues. As a part of the Mediation Scheme, Second Sight will
work with you to investigate your case. It will then liaise with Post Office to obtain
further information before giving an assessment of your case.”
“Will my case definitely be referred to mediation? - If your case is suitable and
you provide accurate, detailed information to Second Sight, then this is likely in most
circumstances.”
That in light of a decision JFSA understands was taken at the October Working Group
meeting in London, after JFSA had left, and which JFSA was informed of during the
telephone meeting on 30" October 2014, with regard to a number of cases now being
held back until a revised Part Two report has been prepared by Second Sight. Due to
the concern that the content of the revised report may affect all cases, JFSA is of the
opinion that no further cases should be released in draft form until that revised report
has been produced and those cases measured against it.
That, dependent upon the content of the yet to be revised Part Two report, it should be
recognized that it may be necessary to re-examine earlier cases where Second Sight
has already arrived at a decision as to whether or not a case was suitable for mediation.
A letter dated 14" October 2014 from Chris Aujard, Post Office’s General Council, to
Kay Linnell, one of JFSA’s advisors, in which Post Office states that it has a statutory
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duty in criminal cases to assess any material which might undermine a prosecution or
assist a defendant, and asked Kay Linnell to check her records to see whether or not
she held such information.
Having made such request of this JFSA advisor, JFSA is presuming that Post Office has
itself undertaken its statutory duty and made similar requests to all its employees and
its subsidiaries/contractors who have been involved in any way with a case leading to a
prosecution of any Scheme Applicant.
In light of this request, JFSA is also presuming that Post Office has provided the
independent investigations firm, Second Sight, with all documents held by Post Office
and its subsidiaries/contractors relating to the cases Second Sight are investigating, and
when prosecution files are requested by Second Sight, these too have been provided in
order to verify all documentation was in order (An example being M030, where such
information would bring clarification to point 6 of the exercise undertaken by SAH.).
That, the current approach of concentrating purely on where the money went, should
not be the sole deciding factor used by Second Sight in considering whether a case is
suitable for mediation. The agreement given to Applicants stated that:-
“First, your case must relate to a financial loss or unfgir treatment that you believe you
have suffered as a result of the Horizon system or any associated issues.”
“The Scheme is oH to any Subpostmaster who believes they have suffered a loss or
"Second Sight will seek to determine whether there was a problem with Horizon (or any
associated issue) that had an linpect on You. If so, Second Sant will also try to
Effectively, all the systemic failures/thematic issues that affect a case should be used in
weighing the suitability of a case for mediation. The issue of where the money went has
seemingly become the sole deciding issue as to whether or not a case is suitable for
mediation, to the exclusion of the systemic failures/thematic issues.
Yet in many cases it is the systemic failures/thematic issues which have led to a
monetary issue and whilst, either due to the passage of time or the lack of
documentation, it is not always possible to establish what has happened to the money,
it is far easier to prove how the systemic failures/thematic issues of a case played such
an important role.
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Then what is going to happen about ail the cases where there was only unfair
treatment due to associated issues with Horizon but there was no monetary issue?
Somehow the whole spirit of the Scheme that JFSA agreed to at the outset and planning stage
has totally disappeared. The further the Scheme progresses, the more entrenched and
defensive Post Office has become, and the original concept of actually seeking the truth has
long since been abandoned, replaced by denial and a culture of blaming the Applicant time
after time. The underlying fact that it was the failure of Post Office to correct the
shortcomings of their Horizon system and its associated issues is ignored by Post Office again
and again.
It is unfortunate that it has become necessary to voice these points, but continuing without
raising these issues would be disingenuous to all those victims of Post Office who believed
Post Office were sincere about addressing their cases.
The question now has to be asked, is there any point in continuing with the Scheme which is
just being turned into a sham by the actions of Post Office?
Alan Bates
Chairman
JFSA
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[Fitename [6.27 JFSA letter to Sir Anthony 10 11 2014(1}.pdf LORIGINAL]
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148 Cid Street
London
ECLY 9HQ
ON
SWiK ORA
& November 2014
Re: Complaint and Mediation Scheme
Twanted to follow up on our telephone conversation on 28 October. You raised a mumber of
concerns over Past Office's engagemeni. with the Scheme and tam grateful to you for daing so. iam
also grateful to you for accepting that there are two sides to every stony.
Asi we discussed. Post OFF
Partiarnent, the Justice:
Horan system,
has gone to great
for Subpostmasters Alfiance USA}, and new indivi
ngths to respand to the issues raised by Members of
al applicants about the
You will recall that both JFSA and Second Sight were involved in the design of the Scheme, the
establishment of the Working Group and the appointment of the indepandent chair.
ta date, Post ice has investigated over 200 cases and is on course te carplete ali investigations
by Christmas We provide the fanding and Secretariat for the Warking Group and we aixo pre
funding for appiivants te abtain professional advice in preparing their complaints. Gr any
reasonable view, the measures we have taken canaot be characterised as being suggestive of bad
faith.
AS i said when we any af those cases. I
ani clear thar th
2, we have found ne evidence of a faolt with Horiza
se fay onmplacency and we will be as rigorous: in investigating the
been with thase we have investigated.
is aot ¢
remaining cases as we }
However, Post Office casnot igaore these investigation findings in determining its approach to
mediation in each case. In particular, Post Office cannot be expected to accept responsibility for
matters where there is no evidence that it is at faidt and where, instead, eros (and sometimes
the part af an applicant or thelr staif have been shawn to:
the Josses in the branch. To my mind, that js not a legalistic but a fairsat
1C3CR
ave caused or contributed
med and rational
wear ppaefRe 20 A
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alse concer?
d st the size af some of the claims for compensation, many of which are
unfeaistic ar opportunist oth. Especially in the absence of evidence of a fault with the Horzan
system, thik sort af dlaim can only spewe fo weaken the prospects fer cagolution for the ag i
i Past O
poculation chout Horizon continues, Past Offic
Geen ia ensure spends taxpayer money prudently,
easonable
ons apsitively
: where the Jacts and the applicants’ expectations offer a
fue Co Enter into those di
has and will cont
ign, the Poses
asd try te achieve
mutually acceptabie resolutioy.
laiso beleve that the suc
eumis that, despite the agreement of all aarties on the ne
not helng honored and this hay the pol
fe atherwise of the Scheme does not rest solely with Post Office. it
i for confidentiality, that coraritment is
ame. Sirnitarly it is regratteble,
p discussions ag it undermines the
'y part in establishing.
ial Le unddere
FSA is sot now fully partics
it played ouch
3s you Say, that
of the Wark:
¢ Group whic!
Given that some peaple may have be
axoecting that a fault with Horiean wouid be found & is
Past Gftice he
helped te design, fam naturally disappointed to hear the concerns you set out, However tant
it that Post Office hag, at every stage of the process, acted in good faith in taking forware
the work of the Scheme, indeed, itis not at aif dear to me what more Post
¢ could reasonably
have done,
Nevertheless, {have listened ta your concerns and wil an them very carehehy,
Finwily, further to our discussion shout your letter of September ath, tcan confirrn that I have asked
Yani Den Bogerd to louk jate the case, Once her enquiries are complete,
be in touch with your office to discuss next steps, inchiding the possi
ne of the teeny willl
y of a meeting,
ok forward to our meeting on 1? Noveraber and I imagine your office will be in touch with
a suggested agenda anc a list of attendees in due course.
wi
Yours
Paula Vennells
Chief Eypeati
wr. postatfinn 2@ ct
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28 PY letter to Arbuthnot $24. 201400. eg