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Witness Name: Alan Stuart
Statement No: WITN09070100
Exhibits: None
Dated: 24.9.23
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF ALAN STUART
I, Alan Stuart, will say as follows...
1. This witness statement is made toassist the Post Office Horizon IT inquiry
(the "Inquiry") with the matters set out in the Rule 9Inquiry Rules 2006.
Background
2. Iam a former employee of Post Office Ltd (“POL”) having joined in March
1986 and started working as a counter clerk at a variety of Crown offices in the
Bromley area. I enrolled for evening classes and gained qualifications in
Bookkeeping, Accounting at RSA level and then ‘A’ level in Accountancy. I
then studied with the Association of Accounting Technicians, becoming
professionally qualified with them in about 1996.
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3. I became an auditor in 1990 auditing all types of post offices around the
Bromley, Dartford, Croydon and south east London area. This mainly involved
assisting at audits either counting cash, stock or checking the weelty dockets.
Occasionally I would act as team leader whereby I would need to prep the
necessary paperwork, complete a branch reconciliation on a document called
a P32 and produce a written report of the findings.
4. My job title has never been Network Field Support Advisor, nor have I ever
considered myself performing that function.
5. I cannot recall the exact year but around 2000/2001 I was promoted to
Audit Manager for London and the southeast, which included Kent, Surrey,
Sussex, Isle of Wight and parts of Hampshire. My duties were similar to before
as regards assisting and leading audits with my focus being on larger (Crown)
branches but included management of a team of up to 9 auditors.
6. In late 2006 I became the manager of the Audit Admin Support Team
having oversight of the admin support processes and procedures.
7. In 2007 I became the Audit Scheduling Manager where my duties included
management and delivery of a risk based annual audit programme. I
scheduled the activities on a daily basis for all 36 auditorsnationwide.
8. After a reorganization in 2009, I became a data analyst initially with the
Branch Conformance Team. In 2011 I was promoted to a data analyst position
in Risk and Compliance, and in another promotion during 2016 I moved to
another data analyst position within Network. I retired from POL on 30"
January 2022.
9. To be an auditor, the prime requisite was to have a good understanding of
balancing processes and have a high degree of accuracy. There was no
formal training on being able to count as myself and all my colleagues had
counter training and experience. Training was provided however on the
introduction of new equipment and counter IT balancing aids such as ECCO,
ECCO+ and Horizon.
10.1 understood the role of auditor to be a verification of Post Office assets,
ensuring a correct and true trading position for the branch and performance of
a survey to confirm the agent had a satisfactory degree of knowledge on Post
Office procedure.
11. Initially I reported to one of two Audit Managers who in turn reported to
the Senior Audit Manager. As this was during the time of district segregation
of post offices, the Senior Audit Manager would schedule audits and
communicate them to us on a daily basis.
12. Throughout my career I have not faced any disciplinary action or been
accused of any criminal offence. Likewise as a manager I’ve never had cause
to doubt the honesty or integrity of any of my staff.
13. My involvement with agents did not extend to disciplinary matters or any
interview. In cases of audit shortages, the matter would be referred to the
Contracts Advisor who then take such action as appropriate. I have attended
Crown Court a number of times with a potential view to be called as a witness
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on branches that have been pursued for criminal activity though I haven't
actually been called, except once for a civil case where an agent was suing a
member of staff and I was called to provide guidance on Post Office
procedure.
14. Throughout my career in audit, I have assisted at 8+ cash centre audits,
led or assisted at 60+ Crown Office audits and led or assisted at 500+ smaller
branches.
The audit process and the policies/practices in place
15. On receiving our scheduled audit activity for the week, the lead auditor
would prep necessary paperwork (cash/stock sheets), check the location and
size of the branch, opening times and if necessary, liaise with any other
teams who may have requested the audit. A meeting time and location would
be communicated to the other auditors in attendance.
16. Most audits were standard risk-based activity and no liaison was required
with other teams, as audit activity was strictly confidential. I would say that
less than 10% of audits were requested by other departments on the basis of
suspicious activity. We would be informed of the source and/or potential
concern and then the source would be contacted should additional
information be required. It was not always necessary.
17. An audit would generally start about half an hour before the branch was
due to open. Printouts from Horizon would be obtained for each stock unit
operated and transfers between them would be reconciled. Each stock unit
would be balanced individually checking cash and stock to the Horizon
printout, and when verified would be allowed to serve. This enabled working
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cash and stock to be assessed so that the branch would be able to open as
normal. The bulk cash and stock would then be counted. Completed
paperwork would then be assembled by the lead auditor who would enter the
details on to an electronic P32 document and a balance derived. The other
auditors would then start on the internal control questionnaire or compliance
part of the audit.
18. Minor discrepancies would be noted and form part of the closing meeting
with the agent. More significant discrepancies would be immediately
noticeable and force a second audit to confirm the audit figures. The agent
would be approached to confirm that all the cash and stock had been
presented. If the shortage could not be found, the Contracts Advisor and if
necessary, the Investigation Team would be contacted and the auditors would
act on their decision. Sometimes it would be to allow the branch to continue
operating, occasionally it would lead to the agent being suspended. This
procedure was in place throughout my time in audit.
Recruitment and training of auditors
19. With regard recruitment and training of auditors, I cannot comment on
documents POL00032698, POL00086765, POL00088453 or POL00088557
as they were all introduced after I left audit.
20. During my time within audit and especially as Audit Manager, I was aware
that recruitment for auditors was advertised internally on completion of an
application form and recommendation from their line manager. All POL
employees were eligible to apply. As audit manager I was at times involved in
the interview process. We did not recruit externally.
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21. Auditors were graded as Postal Officers, the same grade as counter
clerks. Their only requirement was to have a high degree of proficiency at
counting cash and stock, with knowledge of balancing. With the move away
from manual balancing to automated, basic IT skills were also favoured.
22. There was no formal training on how to be an auditor, most of the training
was given on the job. It would be ascertained that the recruit could count and
they would start by being given the dockets or stock to count whilst on audit
and always with a team. The audit manager would then make an assessment
of their capabilities before allowing them to act as team leader, but under
close supervision. Once they had displayed a high degree of proficiency they
could then act as team leader and potentially lead a solo audit on their own.
23. There were meetings and training events from time to time geared around
reporting, computers (such as when the electronic P32 was introduced) and
internal control, but as compliance regulations grew and we became more
regulated these became more frequent and focused. At all times I felt that
audit personnel had the necessary skills and experience to perform their
roles. New starters were kept under close supervision until they displayed the
necessary skill sets.
The planning and scheduling of audits
24. As regards scheduling of audits I compiled the document POL00084650
in 2010. An annual audit plan would be agreed at board level with the audit
committee, taking into account the size of the network, Directly Managed and
Sub-Offices, and auditors available. At the time I took on the role of
Scheduling Manager there were about 36 auditors nationwide.
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25. The number of audits were scheduled for activity throughout the coming
financial year and set as a target. Account would be taken of busy times such
as Christmas when reduced activity would be scheduled and any other known
factors that may have an impact. Mondays were given to auditors for
completion of the previous week’s work and preparation for the coming week.
My audit schedule was issued on the previous Friday.
26. Every branch in the network was listed on a Branch Performance Profile
which was a database into which was fed a variety of information from
different sources to form a risk score. This information included such things
as overnight cash holdings, excessive stock, calls to NBSC and error notices.
The highest risk branches would form the basis of the scheduled audit activity
as type 100 audits.
27. In addition to risk-based audits, a pure random selection of branches
would also form part of the plan in order to test the effectiveness of a risk
based approach as opposed to random. These were categorized as type 150
audits.
28. Each week, priority would be given to known transfers of branches from
one agent to another or closures of branches where a branch would be
permanently closed. Also I would receive information on burglaries or
robberies of branches which would need an urgent audit and may cause the
cancellation of other audit activity.
29. From time to time, I would receive a request for an audit to take place. I
would investigate each request and either agree or deny it depending on
circumstances. Most would be agreed and be scheduled as type 200 audits
taking priority above normal risk-based audits.
30. Audits would be denied if:
e They were requested by an agent.
e There was a lack of evidence to suggest a potential shortage.
e An audit of the branch had already been conducted within the last six
months.
e The branch size and location might make an audit too costly if overnight
stays were considered necessary.
31.No branch would be allowed to go beyond five years without having an
audit. The last audit date was also factored into the Branch Profile.
32. I cannot comment on audit process beyond my time as Audit Manager
(2006). All the documents quoted for me to consider POL00083966,
POL00084801, POL00085534, POL00087627, POL00088252,
POL00087672, POL00084003, POL00084813, POL00085652,
POL00086765, POL00087688, POL00087716 and POL00087614 were
produced after I left. They had no bearing on me or my activities.
33. Sources of information prior to an audit are described in point 14 above.
34. Special (type 200) audits would usually take place on the day after the
agent had performed their own balance. The Horizon balance snapshot taken
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at the outset of the audit would therefore reflect the cash and stock as
declared by the agent. After identification of a shortage, beyond asking the
agent if any further cash or stock is on hand, we would take no further
investigation other than report to the Contracts Advisor and/or Investigation
Team.
35. If a small discrepancy was established, it was common practice to ask the
agent to make good the sum normally by their next balance period, not
necessarily at the time of audit and witnessed. This was made clear to me on
the day I joined audit.
36. On rare occasions after a Contracts Advisor had spoken to an agent
regarding a shortage, the auditors may be asked by the Contacts Advisor to
accept a cheque from the agent for the shortage. This would be entered into
the accounts, remitted out from the office, taken off site and posted ata
different branch.
37. Provided no suspension had taken place, agents would be perfectly at
liberty to conduct their own investigation into losses arising at their branch.
38. Agents would be informed at every stage of how an audit was
progressing. After a successful audit the audit leader would always conduct
an informal closing meeting which would lay out the audit result, requirement
for the shortage to be made good if necessary and highlight any concerns
arising from the internal control questionnaire or compliance tests as they
latterly became known.
39. There was no written process for dealing with issues raised by agents but
being representatives of POL, we would listen to any concerns raised as
sensitively as possible and provide what guidance we could to the agent. If
the issue could not be resolved whilst on site, it would be taken away and put
the Contracts Advisor to resolve. This would be entered on the report, and I
would have no further involvement.
40. I would not consider it possible to conduct an audit at a branch where the
Horizon system was not functional, though I do not recall any such incident
ever arising. Provided there is one terminal operational within a branch, it
would be possible to conduct an audit by logging on to each stock unit
separately and producing a snapshot of each.
41. There was little or no difference between auditing a Crown branch or a
Sub Post Office other than scale and resource required.
42. Fujitsu had no input to POL audit processes whatsoever.
43. Document FUJ00001894 is a technical document that I have never seen.
Having read through it, it seems to me to be more geared towards Internal
Audit processes rather than the Audit Team. The two are distinct and
separate. Internal Audit internal departments and processes for which audit
trails are required, such as for Horizon. They also schedule and conduct
audits at cash centres for which we provide necessary manpower and
resource. The document FUJ00001894 is high end and in my opinion has
little impact on the Audit Team. Only the section entitled ‘Access Using
Standard Reports’ appears to relate to audit activity.
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44. In order to conduct an audit, the only information required would be the
paperwork relating to the last balance performed by the agent and relevant
snapshots produced on horizon for each stock unit operated. These
documents would have been produced by the agent and signed off as a true
reflection of the accounts and assets, and be available to him/her from the
Horizon system as reprints.
45. I have no knowledge of Audit Global User Account POL00002841. The
document was written after I ceased being an operational auditor, though it
seems similar to a process that was in place previously and I seem to recall it
being termed a ‘one shot password’. This would allow auditors to log on toa
branch Horizon terminal in the event of there being no branch staff.
Prosecution of Josephine Hamilton
46. Regarding the audit of South Warnborough post office, I still recall a fair
amount of detail. The audit was scheduled by the scheduling manager at the
time. I had no dealings with the schedule other than to receive details of the
plan via email and communicate that plan to my team of auditors.
47. Due to the size of the branch the requirement was for just one auditor to
attend. Normally for special audits there would be two auditors in attendance
to ensure there could be no subsequent allegations of mis-dealings. However
it was ascertained that the Area Intervention Manager Elaine Ridge and
Graham Brander from the Investigations Team would also be in attendance
so a second auditor was not considered necessary.
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48. I met Elaine and Graham outside the branch which also doubled as a tea
and cake shop on the retail side. As South Warnborough is a small village, I
found it surprising that there seemed to be a lot of staff working on the retail
side. We entered the premises, announced ourselves and was told the agent
who I now know to be Josephine Hamilton had gone sick and would not
attend the audit.
49. As the agent lived nearby, Elaine went to her house and retrieved the
office keys. We entered the office and I set about opening the safe and
checking drawers and cupboards for cash and stock.
50. I cannot recall if a one-shot password was obtained or if log-in details
were supplied by Ms. Hamilton, but access was gained, and a balance
snapshot of the accounts was produced. I then set about counting and
recording the cash and stock. Graham and Elaine played no part in the asset
verification, there were present as witnesses only. The balance snapshot told
me how much cash and stock the agent had declared as being on hand.
When a shortage became apparent, I recounted the cash and stock and
rechecked my figures before entering it on to the P32. Ultimately the audit
resulted in a shortage of £36,583. 12 (thirty-six thousand, five hundred and
eighty three pounds, twelve pence).
51. At no point did Ms. Hamilton attend the branch but on conclusion of
getting a result, Elaine went to see Ms. Hamilton at her house to inform her of
the result and suspend her. Arrangements were then made to transfer the
branch to an interim agent who attended on the day and took over the cash
and stock.
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52. It was my opinion that a tea and cake shop with so many staff (I
remember at least six) in a small village would not be able to support itself
and from an accountant'’s point of view I questioned the business model. I
further formed the opinion that funds were being taken from the Post Office in
order to support the retail side.
53. The size of the discrepancy was unusually large for such a small branch.
54. I do not know what ARQ logs are, or who would have responsibility for
obtaining them, if indeed anyone, or in what circumstances they would be
required.
55. As Area Intervention and Investigations were already on site, I was able
to discuss my initial findings with them on site. I completed an electronic P32
document on site and upon returning home I drafted a report of findings to the
Area Manager Nigel Allen, my immediate line manager Shirley Hailstones and
the National Branch Audit Manager Martin Ferlinc.
56. My dealings with South Warnborough were then complete, until now.
57. I have been involved with many cases of suspensions throughout my time
as both auditor and audit manager due to the identification of shortages.
58. In drafting this statement, I have had no contact with any material person
in respect of this case.
59. My role was to conduct an audit of the branch, where upon on completion
of the audit my interest ceased. I was not made aware of, nor was I interested
in the outcome of the case.
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60. My reflection is that the investigation team should have looked more
closely at the accounts for the retail business to see if it supported the
employment of so many staff. The acid test however would have been to
check the prepared balances of the incoming agent to see if the shortages
continued.
61. As an auditor, my role was to check and verify the accounts and to report
on my findings. I played no role in interviewing, investigating, litigation or
disclosure other than to identify the location of cash and stock.
62.1 have considered the Judgment of the Court of Appeal in Josephine
Hamilton & Others v Post Office Limited [2021] EWCA Crim 577 at
POL00113278 (and in particular at paragraphs 142 to 148). What are your
reflections in respect of this case? See part 60 above.
Prosecution of Ms Seema Misra
63. I have considered the audit report POL00047738.
Audits of West Byfleet Post Office
64. Please describe the circumstances in which the audit on 14 October 2005
was scheduled. I was notified that an audit had been scheduled and that I
was to be the lead auditor. It was normal for new agents to receive an audit
within about 3 months after taking on a branch.
65. I have no recollection of the audit.
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66. I was designated as lead auditor and would have counted the cash and
reconciled the accounts on an electronic P32. I would then have responsibility
for reporting the findings and escalating any shortages to management.
67. The size of the branch required a minimum of 3 auditors. The lead auditor
(myself) would count the cash and reconcile the accounts, one would count
the stock and another auditor would verify any transaction dockets on hand.
68. As the audit did not follow a balancing day, any transaction dockets on
hand would be verified as being on the Horizon system. Special attention
would be paid to any suppression of dockets.
69. I have considered page 2 of POL00054010. There was no requirement to
make any notes and there were no circumstances requiring notes to be
made, other than by way of the audit report.
70. A closing meeting was held with Ms. Misra, to talk through the audit
findings and area of weakness on compliance. It is important to stress that the
audit result was not new nor unexpected by Ms. Misra. It became a
confirmation of a shortage she had originally declared and rolled into
suspense. There was no way that we could investigate the shortage whilst on
site; the opportunity for such was when the shortage first became apparent.
71. With reference to the audit report I compiled, the differences found in
cash, stock and foreign currency would ordinarily be considered a ‘good’
balance result. The area of concern was the amount held in suspense of a
rolled shortage, particularly as the agent was relatively new to the branch.
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72. I do not know what ARQ logs are, or who would have responsibility for
obtaining them, if indeed anyone, or in what circumstances they would be
required.
73. I completed an audit report addressed to the agent and copied to Angela
James, Contracts Manager
74. I have considered paragraphs 53 to 60 of SMIS0000101 in which Ms
Misra describes the audit of her branch. I cannot recall the audit particulars or
any discussion I may have had with Ms Misra.
75. I have considered paragraph 155.2 of SMISO000101. I was not aware of
requests for assistance prior to the audit, nor would it have had any bearing
on the audit. All new agents are offered an off-site training course at their own
expense followed by on-site training from dedicated trainers after
appointment. All agents were supplied with instruction manuals, had on-line
help via Horizon and also a helpline facility. At that time, auditors had no
responsibility for training.
76. I have considered paragraph 4.1 of POL00066262. I had no involvement
with the audit of 14” January 2008, though at the time I would have been the
Scheduling Manager and would have therefore have scheduled the Audit. I
have no recollection of this event specifically as I was then scheduling audits
for the entire country.
77. I had no further involvement before proceedings commenced.
POL -v- Misra
78. I did not provide a witness statement to my recollection.
79. I had no discussions whatsoever with anyone regarding the prosecution.
80. I have considered the Judgment of the Court of Appeal in Josephine
Hamilton & Others v Post Office Limited [2021] EWCA Crim 577 at
POL00113278 (and in particular at paragraphs 198 to 209). I have no
reflections on the case against Ms. Misra.
General
81. I performed my role as an auditor only. I am not qualified to make
judgements on the adequacy or otherwise of the Horizon system.
82. I am not qualified to make judgements on the adequacy or otherwise of
the Horizon system as to the investigation into bugs, errors and defects in
Horizon was sufficiently carried out by the Post Office or if sufficient
information about the same was to the Post Office by Fujitsu.
83. I have no reflections to offer.
83. There are no other matters that I wish to bring to the attention of the
Chair of the Inquiry.
Statement of Truth
I believe the content of this statement to be true.
Dated: 24/09/2023
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Annex to First Witness Statement of Alan Stuart
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Document Description
URN
Control Number
“Assurance Review - Recruitment
(Vetting & Training)” (version 1.0,
27 October 2009)
POL00032698
POL-0029633
“Network auditing approach,
methods and assurance” (2013)
POL00086765
POL-0083823
“Training & Audit Advisor”
(undated)
POL00088453
POL-0085511
“Audit Advisor” (undated)
POL00088557
POL-0085615
“Audit Plan & Scheduling,
Chapter 1 of the Audit Process
Manual” (Version 8.0) (2010)
POL00084650
POL-0081708
“Audit Charter” (version 4.0,
undated)
POL00083966
POL-0081024
“Performing a Branch Audit’,
Chapter 3 of the Audit Process
Manual (version 5.1, May 2010)
POL00084801
POL-0081859
“Core & Outreach Audit Process”,
Chapter 3a of the Audit Process
Manual (version 1.0, 27 May
2011)
POL00085534
POL-0082592
“Follow Up Audit Process”,
Chapter 3b of the Audit Process
Manual (version 3.0, May 2015)
POL00087627
POL-0084685
“Performing a Cash Centre
Audit”, Chapter 7 of the Audit
Process Manual (version 5.0, Aug
2016)
POL00088252
POL-0085310
“Quality Assurance”, Chapter 11
of the Audit Process Manual
(version 5.0, Apr 2015)
POL00087672
POL-0084730
“Post Incident Auditing without
Horizon”, Chapter 14 of the Audit
Process Manual (version 1.0, Nov
2006)
POL00084003
POL-0081061
“Condensed Guide for Audit
Attendance” (version 2, Oct 2008)
POL00084813
POL-0081871
“Requirement of Network Field
Support Advisors at audit,
following discovery of
discrepancy” (version 1.0, Oct
2011)
POL00085652
POL-0082710
“Training Guide: Compliance
Audit Tool” (Sep 2015)
POL00087688
POL-0084746
“Training-Aide for Branch Asset
Checking” (version 1.7, Nov
2014)
POL00087716
POL-0084774
“Terms of Reference Audits”
(version 1, April 2015)
POL00087614
POL-0084672
“Audit Trail Functional
Specification” (version 8.0, 18
October 2004)
FUJ00001894
POINQO008065F
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Global User Account (September I POL00002841 VIS00003855
2016)
the audit report to Nigel Allen POL00044497 POL-0040976
the investigation report POL00044389 POL-0040868
the investigation capture details POL00047887 POL-0044366
form
Alan Stuart witness statement POL00064276 POL-0060755
List of exhibits re: Rv Josephine I POL00059372 POL-0055851
Hamilton
Judgment of the Court of Appeal I POL00113278 POL-0110657
in Josephine Hamilton & Others v
Post Office Limited [2021] EWCA
Crim 577
Audit Report POL00047738 POL-0044217
Email from Issy Hogg to Jarnail I POL00054010 POL-0050489
Singh RE: FW: R v Seema
Misra Guildford Crown Court
Trial 15th March 2010 -
disclosure
Seema Misra case study.
Preliminary Draft Witness
Statement of Seema Misra (High
Court) in Sub-Postmasters
Claimant Group and POL.
SMIS0000101
Seema Misra Case Study -
Schedule of Information regarding
Alan Bates & Others - and - Post
Office Limited
POL00066262
POL-0062741
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