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Witness Name: Alan Lusher
Statement No: WITN05830100
Dated: 10 May 2023
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF ALAN LUSHER
I, Alan Lusher, will say as follows:
I would like to express my support for the Horizon Inquiry and to offer my full co-
operation to Sir Wyn Williams in his investigation. I would also like to express my
sincere sympathy to any subpostmasters (“SPMs”) who were badly affected by the
Horizon project.
To confirm why I am providing this statement, on 25 August 2022 I received a written
request from the Post Office Horizon Inquiry for me to provide a written statement
pursuant to Rule 9 of the Inquiry Rules 2006 — Request 1. This Request contained
21 questions which the Inquiry asked me to address in my statement.
On 06 April 2023 I received a further request from the Post Office Horizon Inquiry
asking me to provide a written statement pursuant to Rule 9 of the Inquiry Rules
2006 — Request 2. This Request contained 76 questions which the Inquiry asked
me to address in my statement.
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4. For ease of reference I have split this statement into two sections: the first dealing
with the Rule 9 Request of 25 August 2022 and the second dealing with the Rule 9
Request of 06 April 2023.
25 AUGUST 2022 —- RULE 9 OF THE INQUIRY RULES 2006 —- REQUEST 1
BACKGROUND
Roles
5. I have been asked to set out an overview of my role(s) within the Post Office. To
assist me, I obtained a list of my roles held during my time at the Post Office which
I understand was taken from ‘Success Factors employee record’. This information
did not cover my job history prior to 1 April 1999 as this information was held in a
legacy HR system but I have detailed below the roles that were listed in the
information provided:
a) 01.04.1999 — 26.09.1999: 50052561 Network Audit Manager — E
b) 27.09.1999 — 30.06.2001: 50059678 Audit Team Leader East
c) 01.07.2001 — 31.10.2001: 50059678 Audit Team Leader East
d) 01.11.2001 — 28.02.2002: 50059678 Audit Team Leader East
e) 01.03.2002 — 31.03.2002: 50059678 Audit Team Leader East
f) 01.04.2002 — 14.05.2002: 50057821 Security Team Manager 2
g) 15.05.2002 — 20.10.2002: 50086276 Operations Manager
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h) 21.10.2002 — 01.01.2003: 50089526 Commercial Security Manager
i) 02.01.2003 — 27.03.2005: 50078190 RLM 431
j) 28.03.2005 — 30.09.2005: 50107026 Manpower Planning Manager
k) 01.10.2005 — 31.03.2006: 50107017 C&SM16
1) 01.04.2006 — 24.09.2006: 50107017 C&SM16
m) 25.09.2006 — 31.10.2007: 50124583 Contract Advisor
n) 01.11.2007 — 29.06.2008: 50124583 Contract Advisor
0) 30.06.2008 — 31.05.2010: 50124583 Contract Advisor
Pp) 01.06.2010 — 30.09.2010: 50185430 Commercial Contract Advisor
q) 01.10.2010 — 31.12.2010: 50185430 Commercial Contract Advisor
r) 01.01.2011 — 31.08.2012: 50196651 Contract Advisor
S) 01.09.2012 — 31.08.2014: 50196651 Contract Advisor
t) 01.09.2014 — 04.01.2017: 50196651 Contract Advisor
u) 05.01.2017 — 30.09.2017: 50196651 Contract Advisor
v) 01.10.2017 — 31.08.2019: Contract Advisor
My recollection of the exact dates and roles is not clear but the following is to the
best of my recollection. My employment with the Post Office commenced on 11
January 1982 and finished on 31 August 2019. My first role was to serve on Crown
Office Counters. I progressed to work with sub-post offices in the counter services
department.
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10.
11.
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When I worked in the audit team at postal officer grade (prior to Horizon) I would go
into the post offices to count cash. Promotion came in approximately 1988, when I
took the role of Management accountant and then I was promoted again to manage
the audit team in the Norwich area in approximately 1990. As audit team leader I
would mostly only attend cash centre audits and conduct audits as part of an
appraisal process to check the audit teams were doing what they should.
The audit team were referred to as the ‘checkers’. When the team went into
branches, they would complete the equivalent of a weekly account check, in the
same way that SPMs would. We would take the starting figure, count everything
coming in and everything going out, look at the stock and then balance the
accounts. We would then review various processes such as security, and check
that opening hours were adhered to and properly advertised. I would be physically
present at those audits when I was audit team leader approximately once a month.
I continued working in the audit team, but covering greater areas — North Thames
and East Anglia, then the South East area and then part of the audit team which
operated on a national basis, managing or conducting audits of admin centres, cash
centres, branch offices and sub-post offices.
Between 2002 and 2003 I was in the Commercial Security team. Almost all of the
work I did in this team was around cheque fraud. I used to intercept a lot of cheque
fraud using data from Horizon.
I also had a 2 year period working in ‘sales’ before I moved to the position of contract
manager between 2005 and 2012 working predominantly in the East, but having
input to any area as needs dictated. As contract manager, I had responsibility for
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12.
13.
14.
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interviewing prospective SPMs, dealing with contractual issues during the period of
their contracts and then dealing with suspensions and terminations of contracts as
required.
Between 2012 and 2019 I had a role as contract manager but covering a particular
type of branch. Specifically, I managed the contracts of ‘multiple partners’ which
included businesses such as McColl’s, Co-ops and One-Stop. These partners
managed a large number of branches, so I had contact with the partners’
management teams but very little contact with individual SPMs. The partners would
have had their own arrangements for supporting their own Post Office staff. As a
contract manager it would not have been my responsibility to visit individual
branches but, occasionally, if a post office was located near to me in my region,
then I might have been asked to act as a contract advisor and interview a SPM on
amore geographical basis.
In terms of my qualifications, I left school with 9 “O” levels and 2 “A” levels. While
working at the Post Office I continued to study and achieved a Master’s Degree in
Business Administration (MBA) in 2004.
Training within the Post Office include a six-week course before serving on the
counter (pre-Horizon) and a residential management course upon promotion to
management. On-the-job training was given for all other roles. Besides this, I cannot
recall anything more specific about my training. I requested a copy of my training
record from the Post Office in the hope that this information might assist in
prompting my memory. However, its only relevance to Horizon is that it shows that
I completed a day’s course on Horizon on 13 June 2003. I believe I would have had
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additional refresher training of perhaps a few hours in circumstances where I was
called on to serve on a counter, for example during strike action by counter staff. In
all cases this would have been ‘user training’.
15. My career progressed from a ‘Postal Officer’, through to ‘Contract Advisor’.
ADVICE AND ASSISTANCE
16. I have been asked to provide an overview of what contact I had with any SPMs or
managers and assistants working in Post Offices, if any. Before Horizon was
introduced and when I was working within “Counter Services” I had frequent contact
with SPMs, visiting their branches and doing such tasks as calculating remuneration
and allowances, performing audits, and dealing with transaction correction notices.
I played a supporting role in conducting audits of Crown Offices.
17. As audit manager, the team that I managed frequently dealt with accounting
difficulties experienced by SPMs. These were matters arising either as a result of
them not balancing their accounts, as a result of transaction corrections being
brought to account or as a result of audits. As an audit manager, I managed the
audit teams but would not necessarily attend audits myself. My contact with the
postmasters would therefore have been fairly minimal, unless there was an
exceptionally large shortfall in the accounts. In that situation, I would be in the
position to make a decision as to whether to suspend the contract pending further
investigation. However, in the ordinary course of events, the contract manager
would make that decision.
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18.
19.
20.
21.
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As contract manager, I engaged in SPM’s appointment interviews, dealing with
general contractual issues, such as opening times, complaints, cash shortages and
contract suspensions and terminations. Further information on this is detailed below
at paragraphs 20 — 28.
I have been asked to describe whether I was responsible for providing SPMs or
Post Office branches with advice or assistance. Please see above for a description
of my job roles. The training team was responsible for the initial training of SPMs
and the helpline was almost always available for advice and assistance. Online help
was also available. If the helpline or training team could not resolve a request for
further assistance, then occasionally a query may have come through to the audit
team. These were typically straightforward matters which were easily resolved,
however, if not, the audit team could arrange for a site visit or audit to occur.
Personally, I would have had very little involvement in this.
When accounting difficulties arose, they were in general dealt with as follows: if the
discrepancy was minor, SPMs were advised to check all cash and stock on hand,
along with any vouchers. If their check did not reveal any errors in balancing, then
they could conclude that there must have been an error in vouchers dispatched or
input into the account earlier in the accounting period. The transaction correcting
system was in place so that the various agencies would check returns sent to them
by SPMs and issue “transaction corrections” to rectify the error.
When there were unexplained accounting shortages, team members would often
liaise with the accounting department at Chesterfield, or other departments to
establish whether error notices were due to be issued. The system of rectifying
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22.
23.
24.
25.
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errors could be slow and several weeks may elapse before a discrepancy could be
corrected in the account. On occasions when there were a number of errors in the
system, it became complex and sometimes almost impossible to pinpoint the
causes of a discrepancy.
Either the audit or the contract team could refer disputed errors to the accounting
team based in Chesterfield who had access to the Horizon system and were very
helpful in resolving errors and latterly had a champion for difficult cases - Andy
Winn.
If a cash shortage arose because of failure to correct a discrepancy or any other
reason, an audit of accounts could be conducted to establish an accurate and
updated figure. Following any type of audit, SPMs were required to withdraw any
surpluses or make good losses.
If a deficiency was significant then the contract manager would be called upon to
consider suspension of the contract of the SPM pending further investigation.
Firstly, the contract advisor would have an initial call with the SPM to establish if
further resources or training was needed or if they needed to suspend the contract.
If the decision was taken that the contract should be suspended, information would
be gathered together from the accounting team at Chesterfield and from the audit
team who would have provided an audit report. Suspension wasn't an exercise in
assigning blame, it was done simply to control risk and gather information until such
time as the issues could be explained and rectified. The contract advisor would then
have an interview with the SPM and, if the SPM desired, a representative of the
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26.
27.
28.
29.
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federation of SPMs would also be present to support them (which was normally the
case).
The purpose of this interview was to establish whether the SPM’s contract should
be reinstated, reinstated with conditions, or terminated.
Depending on the level of the shortage or the nature of the discrepancy, the contract
advisor would also inform the investigation team. Their investigation would be to
establish whether there had been any criminal wrongdoing, whereas the contract
advisor would be concerned with breaches of contract. I never had any direct
involvement in making the decision as to whether criminality had occurred, even
when I was working in the Security Team. If the investigation team became involved
then any contractual decision about termination may have been delayed—If they
discovered evidence which would be relevant to the contract advisor’s decision,
then this would be shared with the contract advisor.
In my role as contract advisor, I was authorized to make the decision to suspend a
contract, with my line manager available to consult as required. Terminating a
contract was not a decision that was taken lightly and senior management was
always involved in the decision. However, over time, there came to be a number of
disputed cases in the courts, which led to more senior personnel making the
decisions about termination. Eventually contract termination was purely a senior
management decision and not the decision of the contract advisor.
The Horizon system was integral to both the day-to-day transactions and the
balancing procedure of SPMs. For the vast majority, the system worked well and in
my own experience, challenges about the system were very rare. I was unaware of
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30.
31.
32.
33.
34.
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any issues raised by “multiple partners” and cannot recall any questioning or
suggestion that Horizon was at fault.
If there had been any questions raised subsequent to a particular termination of
contract, then the whole matter would have gone to the appeal process which was
conducted at a higher grade and I would not have been involved in this.
I cannot recall raising any concerns and therefore I cannot comment on whether
there were any steps that I think should have been taken that were not.
I was aware of occasional complaints about the quality of training provided, but I
believe that the system itself was set up to support SPMs.
I believe there was a very significant training programme for SPMs when the
Horizon system was first commissioned. I was not part of that process and had no
direct knowledge of it.
I would have had knowledge of the arrangements for the introductory training of
newly appointed SPMs after Horizon was introduced. In general, I considered the
training to be sufficient. In particular, every effort was made to ensure that they had
received adequate training including follow-up training. However, after introductory
training, additional training was very rarely provided for SPMs’ staff. You could
therefore end up with a situation where someone could be running a branch who
had received no training direct from the Post Office. SPMs would have had access
to training manuals, the helpline, online resources and the ‘training mode’ of the
Horizon system, in order to support the training of their own staff.
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35. In the initial stages, I cannot recall being aware of any unusual evidence that might
have given me the sense that the problems were not human error but something
else. I cannot recall being aware of Fujitsu or any IT people coming in to sense
check the issues but that does not mean it didn’t happen in some cases — just that
I was unaware of specific incidents of that nature.
TRAINING
36. All SPMs were offered initial training. Some of the training was conducted in the
classroom and some on-site as the Post Office was in operation. The training team
also conducted follow-up visits to ensure new SPMs were confident using the
Horizon system, particularly in the balancing procedure. In addition to this, support
was available to the SPMs online using the Horizon training mode, from the Helpline
and from trainers or visiting officers, who would attend the branch in person if
warranted. I should point out that the entire training regime was managed by a
specific team and therefore I relied on that team to monitor training, provide the
training and ensure that it was sufficient. Only in unusual circumstances would a
contract manager become involved in training matters, for example, to require that
additional training be stipulated as a condition of contract reinstatement.
37. If anybody felt that they were not confident in using Horizon, additional training could
be arranged and often the Federation of Subpostmasters and neighbouring
subpostmasters would be pleased to provide support and assistance, particularly
for new SPMs.
38. SPMs were offered initial on-site and classroom training. The number of training
centres available for classroom training was reduced, which resulted in some
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people deciding not to take up the offer of this training because of the associated
travel commitment.
39. Horizon could also be switched into a ‘training’ mode, allowing the individual to
explore the system and gain confidence in using it.
40. It would be normal that a new SPM would not only be taking on the Post Office, but
also a retail business. Their retail business was often more significant to them than
the Post Office, and the individual could be training for both at the same time. On
such occasions, effective Horizon training time whilst the trainer was on-site could
be limited. This problem could only be resolved by providing training before the
transfer of the business, or additional training after. This was not always easy to
arrange because of the commitments of the training team.
ERRORS OR ISSUES WITH HORIZON SYSTEM
41. Myonly recollection of direct involvement with an allegation that the Horizon system
may have been the cause of discrepancies was in or around 2006-2008, specifically
with the matters arising at the Rivenhall branch. I recall the SPM’s suggestion that
the discrepancies were caused by the system. These events took place many years
ago and therefore my active memory of them is not comprehensive. It is possible
that if I were provided with additional documentation relating to this case, that
elements of it might come back to me.
42. I do recall that, following an interview with the SPM, Mr Ward, I sent out a staff
member, Mandy Lawless, who had been a branch office manager and was
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considered to be an expert in using the Horizon system. She attended the site to
discuss the issue with the SPM but she was unable to substantiate his concerns.
43. Subsequently the local federation representative and then a neighbouring
federation representative also got involved to see what they could do to help resolve
things but they were also unable to substantiate his concerns.
44. As part of the investigation into Rivenhall, I referred the matter to the accounting
department at Chesterfield and would have discussed the matter with my line
manager. I’m aware that the head of the accounting team, Andy Wynn, was involved
to help clarify the reason for the losses. It would not have been my role to
understand the technical issues behind any concerns about Horizon. I believe,
though I am not certain that it would have been Andy Wynn's responsibility to raise
any potential technical issues either internally to the manager responsible for liaison
with Fujitsu, or himself directly to Fujitsu. I was not party to these arrangements but
I was aware that the case had been considered by the right people within the Post
Office.
45. After the termination of the contract at Rivenhall, the entire case was considered
again under the appeals procedure by a senior manager and the termination was
confirmed.
RESOLUTION OF DISPUTES
46. I have been asked to explain whether I was involved in or party to any disputes
between the Post Office and SPMs regarding any shortfalls of money. Please see
paragraphs 20 — 28 above. I could have been involved with such discussions
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47.
48.
49.
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between 2005 and 2019, although, my only recollection of such disputes where the
integrity of Horizon was at stake is in relation to the Rivenhall branch. Please see
paragraphs 41 — 45 above.
Whilst I was aware that senior management had meetings with SPMs about the
difficulties being experienced with Horizon, I remained unaware of the nature or
detail of these discussions.
As described in paragraphs 20 — 28 above, I was involved in the resolution of
various disputes, mainly about cash shortages, but also about other issues, such
as customer complaints or adherence to opening hours. Disputes about the
accounts would sometimes prompt an audit being carried out at the branch and a
subsequent interview as described above. An appeals process was in place if the
SPM was unsatisfied with the outcome. This would involve an experienced and
specially trained senior manager who would hear the case afresh to arrive at an
independent decision.
The accounting team at Chesterfield, who had access to the Horizon system, were
very helpful in resolving disputes arising from accounting discrepancies and I
believe that they would have had the responsibility of ensuring that technical IT
issues were raised with Fujitsu-if appropriate. Disputes directly involving Horizon
were dealt with by the Post Office legal team and senior managers.
I cannot recall ever being involved in contacting or receiving input from Fujitsu at
any stage in the resolution of any disputes. This was not a direction of enquiry open
to me in my role but would have been available to others involved in the process. I
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51.
52.
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believe the account team at Chesterfield could obtain historic data from Fujitsu
relating to individual branch accounting disputes.
As far as I am aware, Horizon was thought by the Post Office to be a totally secure
system. In retrospect, if there had been a more detailed analysis of IT issues, they
might have discovered something at the time but this was not within my sphere or
scope of responsibility.
In other respects, the system provided the environment for open discussion with
SPMs, who often called on the Federation of Subpostmasters for support.
There are no other matters that I consider the Chair of the Inquiry should be aware
of. However, the events took place many years ago and my active memory of them
is therefore very limited.
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06 APRIL 2023 —- RULE 9 OF THE INQUIRY RULES 2006 - REQUEST 2
APPOINTMENT OF SUBPOSTMASTERS
54. I held the position of contract manager between 2005 and 2019 and during this time
I had responsibility for interviewing prospective SPMs. I have had sight of and
reviewed, the following documents:
a) Brief summary of certain sections of the subpostmasters contract” (17
December 2004) (POL00088903);
b) Template letter “Assessment for the position of subpostmaster” (August
2005) (POL00088900);
c) “Agency Recruitment Policy” (version 0.1, October 2008) (POL00005670).
55. I have been asked to describe the process for the selection and appointment of new
SPMs. I can recall that there were various changes and enhancements to the
processes for the selection and appointment of SPMs. Although I was involved in
these processes between 2005 and 2019, my recollection is no longer very good
relating to specific processes at any point within that timeframe.
56. As an interviewer there were also changes in job title, for example, Contract and
Services Manager, Contract Manager, Commercial Contracts Manager, Contracts
Advisor. These are titles which all applied to the same or very similar role, so for
simplicity, I will refer to all as Contracts Advisor unless there is a specific reason to
differentiate.
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57.
58.
59.
60.
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I cannot recall specifically the titles of teams involved in the selection process in the
timeframe specified, but in general terms, I believe there was a central team based
in Chesterfield, latterly known as the Agent Recruitment Team, who would send out
documents to applicants. The Contract Advisor would conduct the interview,
perhaps with a note taker, or using electronic recording equipment. For larger
branches, it was not unusual for two Contract Advisors to interview.
In terms of how vacancies were advertised, normally, applications would come
from people who were in the process of buying a retail business from the incumbent
SPM. If there were no applications from this source and the Post Office was facing
potential closure, then a member of staff would search the area and ask for
applications from suitable businesses.
In relation to the documentation that an individual was required to submit as part of
their application, I cannot be specific to the timeframe, but in general the applicant
would have to supply a completed application form and a business plan, along with
the evidence of identity / right to work in the UK document as specified in the
invitation to interview letter.
In terms of how applicants were assessed during interview, the right to work and a
satisfactory criminal record was confirmed, the business plan would then be
assessed for viability and a competence framework was completed by way of a
formal discussion. The Contracts Advisor was responsible for conducting
interviews.
I have been asked to confirm whether contractual issues were discussed during the
interview and, if so, the details of any discussion and in particular, whether
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62.
63.
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successful applicants were given the chance to review their contract or a summary
of the key points before they were appointed. In answering this question I refer to
document POL0088900 which has a brief summary of certain sections of the SPMs
contract which was sent out by the central team as part of the invitation to attend
an interview. This summary of key points of the contract would be discussed at
interview. Security, for example, would always be discussed, due to its importance
for the safety of the SPM and staff as well as the protection of Post Office funds and
the contractual position regarding cash or stock losses would also always be
discussed.
The Contract Advisor was responsible for deciding whether the vacancy would be
offered to the applicant.
The successful applicant would then receive a pack of documents either delivered
at the time of the transfer by the audit team, or sent by the central administration
team in Chesterfield. This pack would include key documents, for example, an
inventory of Post Office property, a document for them to sign up to the Official
Secrets Act and the full contract.
In terms of what measures were in place to ensure consistency in the selection of
SPMs for appointment, Contract Advisors would be trained by sitting in on
interviews with more experienced colleagues before carrying out any interviews
themselves. As well as initial training, I can remember an ‘away day’ devoted to
training using professional actors as applicants, but I cannot be sure that this was
within the timeframe referred to. For larger branches, two contract advisors would
sometimes conduct the interview.
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CONTRACTUAL LIABILITY OF SUBPOSTMASTER FOR SHORTFALLS
65. I have had sight of and reviewed the following documents:
a) “Losses and gains policy within the POCL agency network” (version 1, 20
November 1998) (POL00088904) (in particular paragraph 3.1);
b) “Post Office Ltd - Security Policy: Accounting losses policy for agency
branches’ (version 1, February 2003) (POL00086845) (in particular,
section 1 and section 3);
c) “Post Office Ltd —- Security Policy: Liability for losses policy (for agency
branches)” (version 1.7, September 2003) (POL00088867) (in particular,
section 1 and section 3);
d) “Post Office Ltd Losses policy — overarching (branches)” (version 9,
effective date April 2006) (POL00030562) (in particular, section 2).
66. I have been asked to confirm what my understanding was when I worked for the
Post Office of the contractual position as to the responsibility of SPMs for shortfalls
or ‘losses’ identified within their branch. My understanding is summed up in the
sections of the contract which stated that “the subpostmaster is responsible for all
losses caused through his own carelessness, negligence or error and also for all
losses caused by his assistants. Deficiencies due to such losses must be made
good without delay.”
67. I have been asked to confirm how the Post Office policy on the responsibility of
employees within the Crown Offices for shortfalls or ‘losses’ identified in a Crown
Office differ from the policy on the responsibility of SPMs for shortfalls or ‘losses’
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identified within their branches. However, I did not have a role in the enforcement
of losses within the Crown Office Network and therefore cannot comment on this.
THE AUDIT PROCESS AND THE POLICIES/PRACTICES IN PLACE
68. From the mid-1980s, I was a member of the Audit Team, carrying out audits as a
Postal Officer. This would involve me conducting audits of sub post offices either
by myself or as part of a team for larger branches. I left the audit team for a time,
but re-joined as manager of the team in the Anglia region, later expanded to the
North Thames and East Anglia region.
69. The role then varied further as part of the team based nationally, to include, for
example, the scheduling of audits. However, the main thrust of the role remained in
the management of the cash centre, branch office and sub office audits.
70. I believe all activities were governed by policies, which we periodically reviewed for
improvement. However, I cannot recall the names of policies or the dates of any
changes.
The audit process
71. I have been asked to review the document: document “Losses and gains policy
within the POCL agency network” (version 1, 20 November 1998) (POL00088904)
(in particular, “Appendix D — Process for losses and gains at Agency Outlets”). I can
confirm that I have reviewed this document.
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72. I have been asked to confirm whether I was familiar with this policy when I was part
of the Audit Team and, despite the passage of time, I can recall some of the
document. I believe that the document was produced at a time when the various
regions of the post office had a degree of autonomy. However, I do not know if this
was produced in North Thames, East Anglia, another region, or was a national
policy.
73. I do not recall that there was any difference in the role of the audit team before or
after the introduction of Horizon. Advice given, either by the audit team or the
helpline, would be to re-check cash, stock and vouchers on hand and try to identify
the source of the misbalance in records of documents dispatched.
74. An audit would not normally be conducted on the report of a misbalance, as the
audit could prove nothing more than what was possible by a careful re-check of the
balance. The audit team would also be able to make checks with Financial Accounts
Department (FAD) in Chesterfield, later known as the Product and Branch
Accounting section (P&BA), to find out if a recent error had been detected in the
branch submissions.
75. Audits would normally be programmed to take place periodically. This was,
however, dependent on the size of the branch, and generally between every one to
three years. There would also be audits conducted within the first 3 months of
service, following robbery or burglary incidents or at the transfer of a branch to a
new SPM. A small number of random audits were included in the programme. Risk
modelling was used increasingly to take into account factors such as the value of
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76.
77.
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cash held and the history of losses and errors at the branch in order to prioritise
branches for audit.
When Horizon was introduced, the only change to the Audit’s Team role was a
change to the process in that, where it was necessary to use accounts information
from the branch, this would be obtained from the Horizon system, rather than the
previous paper-based system. After my time with the audit team, the roles of
trainers and auditors were merged.
I have been asked to confirm whether I am aware of any other policies which were
in place when I worked within the Audit Team governing the audit process. I can
recall that the process of completing an audit would be documented, as would be
the process for selecting branches for audit. In the earlier days of the period in
question, the audit team were also responsible for the monitoring of losses and the
administration of some of the error notice system as well as the administration of
“former subpostmasters’ accounts”, which involved the resolution of discrepancies
for SPMs after they left a branch. Each of these areas was covered by documented
policies.
I have been asked to confirm what sources of information I would expect an auditor
to have considered when completing an audit (pre and post the introduction of
Horizon) and whether these sources varied according to the type of audit being
conducted. I can recall that the basis of an audit consisted of two elements: the
verification of cash, stock and vouchers, and the inspection of compliance to laid
down procedures.
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79.
80.
81.
82.
83.
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In order to verify cash, stock and vouchers, the auditor would obtain a starting figure
from the office account, whether paper based, from the Horizon system or from
other various systems which were in use before the introduction of Horizon. Cash,
stock and vouchers would then be physically counted to arrive at a balance. After
the audit, some figures from the office account could be verified, for example the
value of any remittances sent from or to the branch could be checked against the
records of the cash centre. Other information would always be checked by other
agencies or departments in the normal error checking process.
Calculations would be completed to check that stock holding levels were reasonable
compared to sales, and that overnight cash holdings were within target.
The checking of “vouchers” refers to withdrawals or deposits from or to various
sources — for example the National Savings and Investments (NS&l), or one of the
banks. Over time, the number of paper vouchers decreased as digital input
increased. Fundamentally, nothing about the audit changed with the introduction
of Horizon except for the source of some information at the branch.
When looking at compliance, the auditor would be looking to check a number of
records in the branch, for example to ensure a record was kept of visitors to the
branch and a record of alarm testing. They may check that leaflets and posters on
display were current and that opening times were correctly advertised.
If the audit was conducted to establish a loss following an incident of robbery or
burglary, then some of the checks may have been dispensed with.
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84.
85.
86.
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With the exception of transfer audits and those conducted following a robbery or
burglary, audits were conducted unannounced. On arrival at the branch, the auditor
would obtain access to the Post Office cash, stock and records and the SPM and
staff would be prevented from accessing these or the Horizon system. The
expected plan for the audit would be communicated to the SPM and the person in
charge if the SPM was absent. The branch would be closed to the public for the
minimum amount of time and generally not for the full duration of the audit. Note
that if the SPM was absent, they would, if possible, be contacted to inform them
that an audit was being conducted at their branch.
I have been asked to confirm what further enquiries or investigations an auditor
would undertake if they discovered a discrepancy or a shortfall during an audit. At
the branch, provided proper records had been kept, it was normally possible to
check most of the information entered into the audit account. For example, cash
could be checked against the record of the previous overnight cash holding record,
stock could be checked, albeit approximately, to the last stock levels recorded by
the branch and many vouchers would still be on hand at the branch. The SPM or
officer in charge would normally be on hand to answer questions from the auditor,
especially dealing with matters of local knowledge, but a formal interview would be
a part of the investigation process and not carried out by the audit team.
Further checks of records would take place following, or during an audit by making
telephone enquiries. For example, branch records could be verified against records
of cash and stock received or dispatched with the cash centre, or daily vouchers
dispatched with the accounts department in Chesterfield or the various agencies.
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87.
88.
89.
90.
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Some of these checks could not be undertaken at the time of the audit, as some
items might be in transit.
After the audit was completed, in the case of larger discrepancies, the case would
be passed to the line manager for consideration of precautionary suspension
pending investigation and to the investigation team to consider any criminal
aspects.
If a discrepancy or shortfall was discovered, SPM’s were able to provide their own
information or undertake their own investigation. It would be normal practice to
discuss any discrepancy with the SPM or person in charge and sometimes this
would prompt their memory and result in a resolution. They should always have
been invited to check the figures in the audit account.
In the more serious cases where a SPM’s contract had been precautionarily
suspended, then he or she would be invited to interview with the Contract Advisor
and/or the investigator. I have never been involved with the investigation interviews
conducted by the investigation team, so cannot comment on them, but when
interviewed by a Contract Advisor, the SPM would usually be accompanied by an
officer of the National Federation of SPMs. This interview would be conducted as
soon as reasonable after the precautionary suspension to allow time for information
to be gathered and at this interview, all aspects of the case would be discussed and
every opportunity given for the SPM and their representative to provide any
information for consideration.
I was aware of auditors being given instructions on taking payment from SPM’s to
make up any shortfalls. Payments could be taken and a receipt given. I believe it
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91.
92.
93.
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was also made clear that this payment would be accepted without prejudice to any
further action to be taken by the Post Office.
Any audit would be generally performed with the branch being closed to the public,
and therefore with an urgency to have service resumed as soon as possible.
Therefore, discussions with the SPM would normally be brief whilst the assets were
checked by the auditors. Once any discrepancy had been established, then the
SPM would be invited to check the account and input any local knowledge.
In terms of what processes were in place which allowed a SPM to raise issues or
concerns during an audit, if any issues or concerns were raised by a SPM during
an audit, auditors were encouraged to simply note any issues raised, but not to
question. The audit report would contain a summary of any issues or concerns
raised by the SPM. Any general issues or concerns would be raised with their area
manager / sales manager.
There was no involvement with Fujitsu at any stage in the audit process.
In terms of whether there was any variation between the audit process in respect of
Crown Office branches and other branches, broadly the process was the same for
the verification of assets. However, the check of compliance to procedures differed
because the Post Office employed a manager to ensure ongoing compliance, so
the audit checks were less.
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MY ROLE AND THE POLICIES / PRACTICES IN PLACE RELATING TO ERROR
NOTICES, TRANSACTION CORRECTIONS, TRANSACTION
ACKNOWLEDGEMENTS AND BRANCH DISCREPANCIES
95. Ihave been asked to confirm my involvement in and the policies / practices in place
relating to error notices, transaction corrections, transaction acknowledgements
and branch discrepancies. Within the audit team error notices were received from
various agencies, such as NS&l, and would be sent on to the sub post office to be
brought to account. These would have the effect of rectifying errors made and the
resultant shortage or surplus would be made good or withdrawn as appropriate. I
cannot recall whether “transaction corrections” were introduced at the same time
as the Horizon system, but these had the same effect as error notices — it's just that
they were delivered electronically to the SPM’s Horizon system.
96. Ido not recall what a transaction acknowledgement was.
97. Whena SPM found a discrepancy in the account at some stage and depending on
amount, these were reported to the audit team.
Error notices, transaction corrections, transaction acknowledgements and branch
discrepancies.
98. I was asked to considered the following policies:
a) “Losses and gains policy within the POCL agency network” (version 1, 20
November 1998) (POL00088904) (see, in particular, the table under
paragraph 3.1);
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99.
100.
b)
a)
e)
g)
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“Debt Recovery Processes under Branch Trading” (October 2005)
(POL00085794);
“Post Office Ltd Losses policy — overarching (branches)” (version 9,
effective date April 2006) (POL00030562) and appendices 3 (‘Process for
awaiting TC (Transaction Correction) — Multiples’ at POLO0083951) and 4
(‘Process for awaiting TC (Transaction Correction) — Singletons’ at
POL00083952);
“Transaction Corrections Process Review for Agency Branches” (version
6b (draft, October 2007) (POL00039024);
“Operating Level Agreement: Product & Branch Accounting, Network and
Service Delivery” (version 1.0, March 2009) (POL00039089);
“Operators' In Service Debt - Operators’ Lifecycle Issue - Policy issue 8” (1
January 2012) (POL00113670);
“Policy Document — Postmasters’ In Service Debt” (version 2.0, 4
December 2012) (POL00090357).
I can confirm that I have reviewed these documents.
Prior to the introduction of Branch Trading an error notice was designed to enable
the SPM to make an entry in the branch account to reverse the effect of an earlier
entry made in error. For example, if a deposit of one hundred pounds was entered
in error into the branch accounts as one thousand pounds, then when the office
account was balanced, it would be found to be short by nine hundred pounds. The
error notice would reverse this effect by crediting the account with nine hundred
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pounds, creating a compensating surplus at the next balance of account. An error
notice was sent to the branch by post.
101. After the introduction of Branch Trading a transaction correction was the electronic
equivalent of an error notice. As stated above, I do not recall what a transaction
acknowledgement was.
102. Error notice or Transaction Corrections (“TC”) were issued when a discrepancy was
identified between the branch account and other evidence. This evidence could be,
for example, a customer receipt or an entry in a bank book. It would take some
investigation to establish which entry was correct, but then an error notice or TC
would be issued to reverse the effect of an original error.
103. Error notices were issued by the accounts department in Chesterfield or the various
agencies, such as NS&l. They were sent to the audit team so that they could be
recorded and then sent out to the relevant branches. TCs were electronic versions
of error notices, but would be sent directly to the branch, bypassing the audit team.
104. An error notice would normally be brought to account and the resultant discrepancy
made good or withdrawn. It could be challenged and an explanation sought. The
amount could also be posted to the suspense account, which would have the effect
of declaring that the notice was in the account, but that the resultant discrepancy
had not been dealt with.
105. In order to continue trading, TCs had to be brought to account and the resultant
surplus or shortage made good or withdrawn. I note from document POL0039024
that discrepancies less than £150 should have always have been withdrawn or
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made good, but a dispute process could be invoked for larger errors, giving the
opportunity for further investigation and allowing the SPM to bring any new
evidence. The process was dealt with by the central accounting team.
106. In terms of the process that a SPM was expected to follow if they discovered a
deficiency or surplus in the amount of cash held when balancing a branch, the
contractual position was that surpluses should be withdrawn and shortages made
good without delay.
107. If the SPM was expecting an error notice, discrepancies could be posted to
suspense. I believe permission from the retail Network Manager was required for
this and that there were time limits to avoid amounts being held in suspense
indefinitely. It was not considered to be good practice to simply “roll over” a
discrepancy in the hope that it would come good at the next balance of accounts.
108. When Branch Trading was introduced, Document POL00085794 indicated that
£150 was considered the minimum amount for a deficiency before a SPM was able
to “settle centrally’. Generally, in my work, I was less concerned with smaller
discrepancies, so I am not familiar with the actual position in relation to their
settlement.
109. The Inquiry have informed me that they have received evidence that as part of the
IMPACT programme, which involved the introduction of a new end to end
accounting process via Horizon, the local suspense account which had previously
been available to SPMs was removed. I have been referred to the witness
statement of Susan Harding at WITN03980100, paragraphs 23 to 32 and also to
the following documents:
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a) ‘Losses and gains policy within the POCL agency network’ (version 1, 20
November 1998) (POL00088904) (see, in particular, section 1, part 2
‘Authority To Hold Losses In Unclaimed Payments’);
b) ii) ‘Post Office Ltd - Security Policy: Accounting losses policy for agency
branches’ (version 1, February 2003) (POL00086845) (see, in particular,
section 3 — ‘Authority to Hold Losses’);
c) ‘Post Office Ltd - Security Policy: Liability for losses policy (for agency
branches)’ (version 1.7, September 2003) (POL00088867) (see, in
particular, section 3 — ‘Authority to Hold Losses’);
d) The letter at page 2 of NFSP00000169;
110. I can confirm that I have reviewed these documents.
111. I have been asked to explain what role the local suspense account played before
its removal. The role of the local suspense account was to account for any
unclaimed payments or receipts uncharged to the account. The suspense facility
would also enable shortages or surpluses to be declared, but not made good or
withdrawn. For example, if the balance of account showed a shortage, this could be
entered as an unclaimed payment, which would have the same effect as adding it
to the cash on hand, negating the shortage. With permission, the facility could be
used legitimately to hold discrepancies for up to 8 weeks, usually whist awaiting an
error notice. The facility was replaced by the debt resolution process.
112. By October 2005 (the date of the guidance “Debt Recovery Processes under
Branch Trading” at POL00085794), it is correct that the only option open to a SPM
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who received a TC which they did not understand, or wished to challenge, was to
call the NBSC helpline.
113. This would result in either a satisfactory explanation being given so the TC would
be brought to account; evidence that the TC was incorrectly issued resulting in a
compensation; TC being issued; or the dispute process being invoked which would
result in the amount being held in a separate account whilst further investigations
took place. This is referred to in document POL00085794.
114. It is correct that, if the SPM could not provide information at the time of the call to
the helpline to show that the TC was issued incorrectly, the SPM was required to
“Accept and Settle Centrally” whilst a further investigation took place. However, I
was not involved in this process.
115. It is correct that, if a SPM identified a discrepancy which they considered to have
been caused by a system error, the only option available to them was to call the
NSBC helpline and seek agreement of Product and Branch Accounting to “settle
centrally” while the matter was investigated. This was the process in respect of any
disputed discrepancy. Separate to the NSBC helpline, there was also a dedicated
“Horizon Helpdesk”.
116. I have been asked whether “settling centrally” signifies acceptance of debt liability,
as is suggested in the document dated 14 November 2008 entitled “TC/Debt
Recovery Review” at POL00001404. My understanding of the way the process was
used in practice is that settling centrally was an acceptance of debt liability, unless
the dispute resolution process was invoked, which would stop the debt recovery
process pending further investigation.
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117. I would like to point out that the “settle centrally” facility was used routinely by
branches managed by the “multiple partners”. This enabled the partner to settle the
discrepancies for all the branches they managed in a single settlement to the Post
Office.
118. There was not anything to distinguish a disputed debt from an undisputed debt and
I cannot see that the policy or the contract made any distinction.
119. Atthe time, the contractual position in respect of losses was clear and the SPM was
responsible for all kinds of losses whether caused by carelessness, negligence or
error and losses of all kinds caused by assistants.
120. To avoid any confusion around the term “settle centrally” I would like to explain that
the term was often used to describe the action of clicking on the button to accept a
TC. Clicking this button then led to options of either accepting liability to pay money
into the account, or to raise a dispute. If the SPM disputed a TC, then there was a
process in place to investigate the error without the need for immediate settlement.
121. On that basis I found it satisfactory that SPMs were required to click the button to
“settle centrally” even if a TC was disputed as immediate payment was then not
required and a delay enabled time for enquiries to be made and any proof to be
provided. I still consider this to be a satisfactory system of bringing to account TCs
even if disputed. It is only in the light of the findings of the court case that it has
been found that the process of investigating any dispute has been found inadequate
in relation to finding Horizon system errors.
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122. I would agree that the process for challenging TCs / TAs discrepancies meant that
a deficiency or loss was assumed to be the result of carelessness, negligence or
error caused by the SPM or any staff employed.
MY ROLE WITHIN THE COMMERCIAL SECURITY TEAM
123. During my short time within the Commercial Security Team, my role was to reduce
losses to the Post Office caused by weaknesses in product security. There may
have been minor involvement with other products, the detail of which I cannot recall,
but my main task was to look at cheque encashment fraud.
124. Inorder to do this, data was downloaded daily from the relevant system which would
show the account number of all encased cheques across the Post Office network.
This data must have originated from the Horizon system, but I was able to download
it. I cannot clearly recall whether I has download access to Horizon, but I believe
there was another computer system which came between my download and the
source of the data. Multiple encashments from a single bank account could be
identified, which could then be further investigated. This system enabled many
fraudulent encashments to be stopped. I do not recall any fraud being perpetrated
by SPMs or Post Office staff, only by dishonest members of the public.
125. I had no concerns during this time about the reliability of Horizon data. The data
was verified by the counterfeit cheques which were gathered in.
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“CORRECTIVE ACTION” TAKEN AGAINST SPMs, SUSPENSION,
TERMINATION AND APPEALS
126. My permanent roles within the Post Office are described above, but on some
occasions, I covered, without additional pay, the role of the contract advisor line
manager. On occasions in this role, I would be contacted by a Contract Advisor,
should they wish to discuss a potential suspension. I would always have the option
of discussing any decision with another Contract Advisor line manager, or other
senior manager, if necessary.
“Corrective Action” taken against SPMs
127. I can confirm that I have reviewed the memo dated 15 February 2006 entitled
“Corrective Action for agents — Process, Timescales and Letters” (POL00083945).
128. Where any accounting errors which generate transactions corrections were
identified, a member of staff, either a trainer or a visiting officer, would be sent out
to the branch to provide training or support in the balancing process. The National
Federation of Subpostmasters were often very helpful, particularly in providing
coaching and support to new SPMs. On occasions full days of additional support
from a trainer could be arranged.
129. It is not correct that it was assumed that SPMs who were receiving “[frequent]
transactions corrections” were those “yet to embrace the changes and challenges
the business faces”. I believe the corrective action process sought to reduce the
cost to the Post Office of frequent errors. This was a separate issue to helping to
bring about the cultural change to proactive selling of products by SPMs rather than
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just providing service to customers. The support provided in cases of frequent errors
are listed at point 36. Remedial action to encourage active selling was likely to be
coaching and training from the Sales Account Manager, supported by the Contract
Advisor (Contract and Services Manager as referred to within POL00083945.) I
recall few cases coming through to the Contract Advisors, which focused on
reluctance of SPMs to sell products.
130. In relation to paragraph 3.4: “Precautionary Suspension and Summary
Termination”, in the absence of “evidence of dishonesty”, I have been asked to
confirm what kind of “material breach of the contract for services would justify such
action.” I can recall that breaches of the contract for services which could lead to
precautionary suspension or summary termination could be cases where
carelessness, negligence or error were evident or where losses were caused by an
assistant.
131. I do not recall having any involvement with “corrective action” against Crown Office
staff. I therefore cannot recommend on how the process differed from the process
applicable to SPMs.
Suspension, termination and appeals
132. I can confirm that I have reviewed the following documents:
a) “Managing Agents Contracts” (version 3, 1 January 2001)
(POL00089004);
b) “Outlet Support — Audit Contact Points” (version 2, September 2006)
(POL00084002);
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c) “Post Office Limited: Appeals Handbook” (19 June 2008) (POL00005856);
d) “Subpostmaster Appeals Panel Process (version 1) (POL00005962) and
associated flowchart (version 1) (POL00086107);
e
“Company Operated Post Office branches: dealing with resignation of and
applications from existing Operators” (20 May 2011) (POL00085448);
f) “Policy and Process Amendments to ACC 12/2009 (Deployment of Post
Office operating models in cases of summary termination and resignation
to avoid summary termination)” (16 June 2011) (POL00086005);
“Managing Shortages at Audit: Process and Policy Guidelines”
g
(POL00086358) and the associated flowchart “Managing shortfalls at
Audit” (POL00086081) (25 July 2011);
h
“Subpostmaster Appeal Panel Process Review” (March 2012)
(POL00086828);
i) “Guidance to Post Office Ltd personnel dealing with requests from Post
Office Ltd Operators to be accompanied by a friend at interview” (25 June
2012) (POL00086704);
j) The email at POL00087258 and attachment “Horizon Challenge Process
Attachment’ (29 August 2012) (POL00087259);
k) “Guiding Principles for Suspension” (2 November 2012) (POL000861 16).
133. I have been asked to confirm what a contract manager’s / contract advisor’s role
was following the discovery of a discrepancy or shortfall during an audit and what
process was followed when an auditor's report was provided to them. When a
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shortfall in a branch account was discovered by the audit team of over £1,000, then
an auditor would make contact with a Contract Advisor who would then, in
consultation with their line manager, make a decision on whether to suspend the
contract to give time for further investigation, or to allow trading to continue based
on information provided.
134. If the deficiency was less than £1,000 this would be highlighted in the audit report,
but not brought to the immediate attention of the Contract Advisor.
135. In circumstances where a discrepancy and/ or shortfall was identified, the situation
changed over time as to who was responsible for deciding whether a SPM should
be suspended. For a long time, the Contract Advisor would consult with a senior
manager before any decision was made. As awareness of Horizon difficulties
increased, any such decision was taken at senior manager level.
136. In relation to how an individual responsible decided whether or not to suspend a
SPM, I recall the “Guiding Principles for Suspension” document, ref POL00086116
and my understanding is that this was designed to be an aid memoire for Contract
Advisors to assist them in their decision making. This document would be taken into
consideration, along with information provided by the audit team and any other
information available. Before the decision was taken, there would always be
consultation between the Contract Advisor and their line manager.
137. If the precautionary suspension was due to account shortages, the SPM would
normally be informed by telephone at the time of the audit, and this would be
confirmed by letter shortly afterwards.
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138. The decision to make a precautionary suspension pending investigation would be
taken by the Post Office and I do not believe there was any process for the SPM to
make representation about that decision. However, it would often be the case that
the Contract Advisor would speak to the SPM at the time of audit and before the
decision to suspend was taken. At that stage the SPM could bring forward any
matters for consideration.
139. As to whether SPMs were remunerated for the period of their suspension,
remuneration would normally be withheld. Direction for this process is outlined
within the contract, but I do not recall the detail.
140. In terms of who was responsible for deciding whether a SPMs contract should be
terminated where a discrepancy and / or shortfall was identified, once the decision
to precautionarily suspend a contract was made, evidence would then be gathered
to enable a meaningful interview to take place where all aspects of the case could
be discussed. In some cases, the interview could be conducted a few days after the
suspension of the contract, but this was dependent on what information needed to
be gathered. As with the decision to suspend the contract, a senior manager,
normally the line manager of the Contract Advisor would be consulted before a
decision to reinstate or terminate the contract was made.
141. At interview, evidence would be heard from the SPM and the Contract Advisor.
The SPM would usually be accompanied by a friend — often a representative of the
Federation of Subpostmasters. Whilst that “friend” was not permitted to formally
represent a SPM, they could be useful to both parties in helping to clarify any issues
relating to day-to-day transactions in the branch. The Contract Advisor would
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present the report from the auditors and any other information which was relevant
to the case.
142. Prior to the interview the Contract Advisor may consult with the accounts
department and the security team if a criminal investigation was being considered,
as well as any other relevant agency. Before a decision was taken on whether to
re-instate the contract with or without conditions, or to terminate it, a senior
manager, usually the line manager of the Contract Advisor would always be
consulted.
143. If the decision was made not to terminate a SPMs contract after they had been
suspended, they would be informed of the decision not to terminate as soon as
possible and of any conditions to the re-instatement. Provided any conditions were
met, the branch contract would be reinstated. If the branch had been closed since
the precautionary suspension, then it would be re-opened as soon as practicable
and if it had been transferred to a temporary SPM, then a transfer back would be
arranged.
144. As I recall, a SPMs contract could be terminated without notice in cases of
bankruptcy, abandonment of service or death of the SPM.
145. SPMs did not have the right to appeal against the decision to suspend them. The
decision to precautionarily suspend pending further investigation was made by the
Post Office based on evidence available at the time.
146. The SPMs did, however, have the right to appeal a decision to terminate their
contract. Appeals were heard only by specially trained senior managers. I recall
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taking notes during appeals before it was common practice to record the appeal
interview using an electronic device, but as I never achieved the status of senior
manager, I never had input into the decision making.
147. Although I was never involved in deciding on a SPM’s appeal I am aware that the
appeal hearing was regarded as a completely fresh review of all the evidence and
every opportunity was given for the SPM to present their case.
148. The SPM was invited to present their case and had the opportunity to make
representations before the appeal was determined.
149. I cannot recall any changes to suspension, termination or appeal that were brought
about by the Network Transformation Programme.
150. As auser of the policies, I may have been consulted on any revisions over a number
of years. My only specific recollection is in helping to revise process to do with
appeals and to provide assistance in the training of appeals managers as indicated
in the document POL00086828 — “Subpostmasters Appeal Panel Process review’.
151. In relation to what approach was taken to termination of contract decisions when
criminal or civil proceedings had not yet been resolved, any criminal proceedings
would take place independently to the contractual process. Civil proceedings would
be started as part of the “Former Subpostmasters Accounts” process, so would not
be commenced until after any debt was established and the termination process
completed.
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RECOVERY OF AGENTS’ DEBT
152. I can confirm that I have reviewed the following documents:
a) “Losses at SPSO’s: Guidelines on responsibilities and recovery
arrangements” (understood to be issued in 1988) (POL00083939) (see, in
particular, paragraphs 15 to 28);
b) ‘Losses and gains policy within the POCL agency network’ (version 1, 20
November 1998) (POL00088904) (see, in particular, sections 3 and 4 and
appendices D and kK);
c) Working agreement — “Finance Service Centre and Network” (version
2.12, undated) (POL00088897) (see, in particular, paragraph 3.7);
d) “Fraud & Conformance Team Handover Document” (3 March 2012,
revised July 2012) (POL00002086).
153. I have been asked to explain my role and that of contract managers / contract
advisors more generally in relation to recovering debt from current and former
SPMs. As regional audit manager, I was involved with recovery of debt from serving
and former SPMs. The process was to write to SPMs explaining the contractual
position and the reason for the debt. Repayment plans were offered and if recovery
proved to be impossible, then the cases were passed up to more senior
management for consideration of write-off or to be passed to the legal department
for their input.
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154. POL00088904 indicates Retail Line Managers and Heads of Retail Network took
on these responsibilities when regions existed, although I believe the audit team
played an administrative role in monitoring losses.
155. Although I cannot be sure of dates or their exact role, Contract Advisors also
became involved in the process. I believe any write-off authority given to Contract
Advisors was later withdrawn and applied only to senior managers.
156. I have been asked what involvement contract managers / contract advisors had in
decision-making relating to agent debt being dealt with by the Financial Services
Centre (“FSC”) after a SPM had opted to “settle centrally”. The FCS would deal with
providing information and evidence of any debt. The Contract Advisor would be
involved in recovery of the debt.
157. I cannot recall any detail around any other teams within the Post Office which were
involved in the debt recovery and branch conformance.
158. I can confirm that I have reviewed the following documents:
a) “Losses and gains policy within the POCL agency network” (version 1, 20
November 1998) (POL00088904) (see, in particular, section 5 and
appendices J and L);
b) “Post Office Ltd - Security Policy: Accounting losses policy for agency
branches” (version 1, February 2003) (POLO0086845) (see, in particular,
section 4 and section 5);
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c) “Post Office Ltd —- Security Policy: Liability for losses policy (for agency
branches)” (version 1.7, September 2003) (POL00088867) (see, in
particular, section 4 and section 5);
d) “Post Office Ltd Losses policy — overarching (branches)” (version 9,
effective date April 2006) (POL00030562) and appendix 5 “Process for
seeking relief on losses — singletons” (POL00005816),
159. It can be seen from these documents that responsibility for the recovery of losses
changed over time, with audit, the retail line and Contract Advisors being involved
at various times and in various ways.
160. I recall that “write-off could have been considered for accounting losses if the SPM
was within the first 6 weeks of service and in cases of exceptional hardship. The
earlier document POLO0088904 describes more factors which Retail Network
Managers and Heads of Retail Network could consider, which included accounting
cases where evidence was not conclusive. Document POL00005816 refers to
distressing circumstances which an Area Performance Manager may take into
account when considering write-off. I was not involved in decisions taken by these
managers.
161. I am unaware of the frequency of debt write-off for SPMs.
CIVIL CLAIMS AND OTHER DEBT RECOVERY PROCEEDINGS
162. I have been asked in what circumstances were civil claims / other debt recovery
proceedings brought on behalf of the Post Office to recover debt from current or
former SPMs. If debt recovery had been unsuccessful, after write off criteria had
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been considered and repayments plans discussed, then cases were passed to
either senior managers or the legal team to decide whether to further pursue the
debt.
163. I was not involved at any time with the recovery of debt from Crown Office
employees and can therefore not answer any questions in relation to this.
CASES AGAINST SPMs
164. I have been asked what, if any, recollection I have of the following criminal cases:
a) Nichola Arch
b) Susan Hazzleton
c) Lisa Brennan
d) David Yates
e) Carl Page
f) David Blakey
g) Tahir Mahmood
h) Oyeteju Adedayo
i) Hughie Thomas
j) Suzanne Palmer
k) Janet Skinner
l) Jo Hamilton
m) Pauline Stonehouse
n) Susan Rudkin
©) Julian Wilson
p) Peter Holmes
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q) Seema Misra
r) Allison Henderson
s) Alison Hall
t) Joan Bailey
u) Lynette Hutchings
v) Grant Allen
w) Khayyam Ishaq
x) Angela Sefton
y) Ann Neild
165. I have no recollection of any of the above listed criminal cases, with the exception
of Suzanne Palmer and Allison Henderson.
Suzanne Palmer
166. The Inquiry have provided me the following documents: POL00068275;
POL00068277; POL00068278; POL00068281; POL00068280; POL00068282;
POL00068283; POL00068575; and POL00068581.
167. I have provided a witness statement in relation to Suzanne Palmer's bankruptcy
case on 03/04/2023 and therefore my memory of the case has been at least partially
refreshed. I was not involved in the criminal case against Suzanne Palmer, but
would have supplied information to the security investigation team if requested to
do so, but I have no specific recollection that any such request was made to me.
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Allison Henderson
168. The Inquiry have provided me with the following documents: POL00025670;
POL00025672; POL00044501; POL00046853; POL00044900; POL00047152;
POL00047235; POL00054285; and POL00054422.
169. The documents provided remind me that an audit was carried out at the Worstead
branch of which Allison Henderson was SPM revealing a shortage in the account
of £11,957.78. I invited Mrs. Henderson to interview to decide on the future of the
contract for services, but before that interview took place, Mrs. Henderson resigned.
The security investigations team requested a witness statement from me, which I
supplied and is document POL00047235 dated 20 September 2010. I had no further
involvement with any criminal proceedings.
170. I have been asked whether there are any prosecutions that I had a role in that I
consider are relevant to the matters being investigated by the Inquiry. I was never
involved with the security investigations team and my only involvement in any
criminal cases was to provide information to them, or on a very limited number of
occasions, a witness statement. I was not involved in criminal cases, other than to
provide statements or information.
171. I have been asked what, if any, recollection I have of the following civil actions:
a) Aslam Ramtoola
c) Kevin Palmer
d) Rachel Williams
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e) Frank Holt
f) Susan McKnight
g) Tracey Etheridge
h) Katherine McAlerney
i) Keith Macaldowie
j) Lee Castleton
k) Julie Wolstenholme
172. I was involved with deciding on the future of contracts for services, not any civil
action. I take “civil action” to mean the recovery of debt. There are no civil actions
that I had any role in, or that I would consider relevant for this inquiry.
KNOWLEDGE OF BUGS, ERRORS AND DEFECTS IN THE HORIZON SYSTEM
173. I have considered the correspondence at POL00073790 and POL00105278. These
documents describe a situation around a discrepancy found at an audit in April 2008
at The Grange Post Office branch whilst Kevin Palmer was the SPM. It was to do
with accounting for lottery scratch cards. It appears that there was confusion about
the correct way of accounting for scratch cards and as a result Kevin Palmer was
left with a shortage to make good. The case was sent to Andy Winn in the accounts
department in Chesterfield to clarify as he had the expertise and access to the
records needed. He wrote to Mr Palmer in October 2012 with an explanation
POL00105278.
174. Asa Contract Advisor I was aware that the system used for accounting for scratch
cards was the cause of a disproportionate number of errors, but I have no reason
to believe that this was caused by any bugs, errors or defects in the Horizon system.
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175. At the time of the introduction of the system and consistently throughout the time
when groups of SPMs were questioning the robustness of the Horizon system, my
colleagues and I in the contracts team were assured of its complete reliability. I was
assured that the Horizon system was not capable of causing discrepancies. I
considered the system as reliable in reporting discrepancies in the account. I was
also assured that if the system stopped working due to an interruption in the power
supply, everything was recorded, so would be brought back when the supply was
restored.
OTHER MATTERS
176. It has come to light that decisions in which I have been involved in the past may
have been based on incorrect information obtained from the Horizon system. It has
subsequently been found that the Horizon system, on which I relied, has been found
* to be less reliable than I was assured it was. I would like to express my sincere
apologies to anybody who may have been affected unjustly.
Statement of Truth
I believe the content of this statement to be true.
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Index to First Witness Statement of Alan Lusher
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No
URN
Document Description
Control Number
POL00088903
Brief summary of certain sections of the
subpostmasters contract
POL-0085961
POL00088900
Template letter “Assessment for the
position of subpostmaster”
POL-0085958
POL00005670
Agency Recruitment Policy (version 0.1,
October 2008)
VIS00006738
POL00088904
Losses and gains policy within the POCL
agency network (version 1, 20
November 1998)
POL-0085962
POL00086845
Post Office Ltd — Security Policy:
Accounting losses policy for agency
branches (version 1, February 2003)
POL-0083903
POL00088867
Post Office Ltd — Security Policy: Liability
for losses policy (for agency branches)
(version 1.7, September 2003)
POL-0085925
POL00030562
Post Office Ltd Losses policy —
overarching (branches) (version 9,
effective date April 2006)
POL-0027044
POL00085794
Debt Recovery Processes under Branch
Trading (October 2005)
POL-0082852
POL00083951
Process for awaiting TC (Transaction
Correction) — Multiples
POL-0081009
10
POL00083952
Process for awaiting TC (Transaction
Correction) — Singletons
POL-0081010
11
POL00039024
Transaction Corrections Process Review
for Agency Branches (version 6b (draft,
October 2007)
POL-0035506
12
POL00039089
Operating Level Agreement: Product &
Branch Accounting, Network and Service
Delivery (version 1.0, March 2009)
POL-0035571
13
POL00113670
Operators’ In Service Debt - Operators’
Lifecycle Issue - Policy issue 8 (1
January 2012)
POL-0112554
14
POL00090357
Policy Document — Postmasters’ In
Service Debt (version 2.0, 4 December
2012)
POL-0087326
15
WITN03980100
First Witness Statement of Sue Harding
16
NFSP00000169
Letter circulated to the National
Executive Council enclosing
correspondence regarding debt recovery
process dated 17 December 2004
VIS00007617
17
POL00001404
TC/Debt Recovery Review — Key
feedback issues
VIS00002418
18
POL00083945
Corrective Action for agents — Process,
Timescales and Letters
POL-0081003
19
POL00089004
Managing Agents Contracts (version 3, 1
January 2001)
POL-0080965
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20
POL00084002
Outlet Support — Audit Contact Points
(version 2, September 2006)
POL-0081060
21
POL00005856
Post Office Limited: Appeals Handbook
(19 June 2008)
VIS00006924
22
POL00005962
Subpostmaster Appeals Panel Process
(version 1)
VIS00007030
23
POL00086107
SPMR Appeal Process Flowchart v1
POL-0083165
24
POL00085448
Company Operated Post Office
branches: dealing with resignation of and
applications from existing Operators (20
May 2011)
POL-0082506
25
POL00086005
Policy and Process Amendments to ACC
12/2009 (Deployment of Post Office
operating models in cases of summary
termination and resignation to avoid
summary termination) (16 June 2011)
POL-0083063
26
POL00086358
Managing Shortages at Audit: Process
and Policy Guidelines
POL-0083416
27
POL00086081
Managing shortfalls at Audit
POL-0083139
28
POL00086828
Subpostmaster Appeal Panel Process
Review (March 2012)
POL-0083886
29
POL00086704
Guidance to Post Office Ltd personnel
dealing with requests from Post Office
Ltd Operators to be accompanied by a
friend at interview (25 June 2012)
POL-0083762
30
POL00087258
Email from Nigel Allen to Anita Bravata,
Craig Tuthill and others re: FW: Horizon
Challenge Cases - Process to be
adopted - Take 2.
POL-0084316
31
POL00087259
Horizon Challenge Process Attachment
(29 August 2012)
POL-0084317
32
POL00086116
Guiding Principles for Suspension (2
November 2012)
POL-0083174
33
POL00083939
Losses at SPSO’s: Guidelines on
responsibilities and recovery
arrangements (understood to be issued
in 1988)
POL-0080997
34
POL00088897
Finance Service Centre and Network
(version 2.12, undated)
POL-0085955
35
POL00002086
Fraud & Conformance Team Handover
Document (3 March 2012, revised July
2012)
VIS00003100
36
POL00005816
Appendix 5: Process for seeking relief on
losses — singletons
VIS00006884
37
POL00068275
Letter from Alan Lusher to Suzanne
Palmer - terminating contract
POL-0064754
38
POL00068277
Letter from Alan Lusher to Suzanne
Palmer terminating contract - with
annotations
POL-0064756
39
POL00068278
Letter from Mr Alan Lusher to Mrs
Suzanne Palmer re: Suspension of
Contract for services
POL-0064757
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40
POL00068281
Terms to be Included in Temporary
Contract for Subpostmaster for
Maureen Upton of The Grange Post
Office
POL-0064760
41
POL00068280
Post Office Ltd Investigation
Personnel Report on False
Accounting Offence for Suzanne
Palmer of The Grange Post Office
POL-0064759
42
POL00068282
Letter from Mr Alan Lusher to Mrs
Suzanne Palmer re: Suspension
POL-0064761
43
POL00068283
Letter from Mr Peter Riches to Mr
Alan Lusher and others re: Audit of
Post Office The Grange branch, FAD
103140 and Letters from Ms Dawn
Wall to Ms Claire Watts re: Error
Notices cleared by Deduction from
Remuneration Concurrence
POL-0064762
44
POL00068575
Letter from K Palmer to People and
Organisational Development Services
about applying to be SPM at The
Grange in place of Suzanne Palmer
POL-0065054
45
POL00068581
Email chain between Alan Lusher and
Nicola Prady about K Palmer applying
to be SPM at the Grange following
termination of Suzanne Palmer's
contract
POL-0065060
46
POL00025670
Letter from Alan Lusher inviting Mrs
Henderson for interview before final
decision on contract termination
POL-0022149
47
POL00025672
Letter to Mrs A. Henderson from Alan
Lusher accepting resignation and
termination of contract
POL-0022151
48
POL00044501
Memo from Christopher G Knight to
Rob Wilson re: Allison HENDERSON
(response to note 25.03.2010)
POL-0040980
49
POL00046853
Case Closure Reporting - Mrs Alison
Henderson (Worstead branch) dated
19/01/2011
POL-0043332
50
POL00044900
Email from Ann Bailey to Christopher
G Knight, cc'd Alan Lusher re:
POLTD/0910/0167 Mrs Allison
Henderson, FAD 226/136, Worstead
Post Office
POL-0041379
51
POL00047152
Investigation report of Christopher
Knight re. SPM Alison Henderson
POL-0043631
52
POL00047235
Royal Mail Group Witness Statement
of Mr Alan Lusher dated the 20th of
September 2010 re. SPM Alison
Henderson
POL-0043714
53
POL00054285
Letter from Allison Henderson re:
Statement of intention to market the
premises
POL-0050764
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54
POL00054422
Suspect Offender Reporting from
Christopher G Knight to Post Office
Security
POL-0050901
55
POL00073790
Email from Carol Ballan to Alan
Lusher incl email chain about the
Grange Post Office
POL-0070353
56
POL00105278
Letter Correspondence between Andy
Winn (Post Office Limited) and Mr K
Palmer (The Grange Post Office) re
Lottery Scratchcards, with associated
document and emails
POL-0104386
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