A report by forensic accountants that found computer bugs in the Post Office’s computer system has underlined the importance of basic bookkeeping and staff training, experts say.
The report by Second Sight comes after UK sub-postmasters said they had been wrongly accused of theft, fraud and false accounting. Some lost their homes and a few went to prison.
Second Sight was hired by the Post Office to investigate a handful of the sub-postmasters' claims. Although the accountant's interim report found no evidence of systemic problems with the core software, it did find bugs in it.
It found two occasions, in 2011 and 2012, when the Post Office identified “defects” in Horizon that resulted in a shortfall of about £9,000 at 76 branches. The Post Office took a year to realise that the second computer defect had happened.
The Post Office later made good those losses and the sub-postmasters were not held liable.
Sub-postmasters criticised Horizon for being too complex, having unreliable hardware and having inadequate helpdesk support, the report found.
The Post Office said the report showed its system was effective but said it would improve training and support.
It also said it would:
- Complete the review of cases started by Second Sight last year
- A review chaired by an independent figure to determine how an independent safety net might be introduced to adjudicate in disputed cases in the future
- A new “branch user forum” to provide a way for sub-postmasters and others to “raise issues and insights around business processes, training and support, directly feeding into the organisation’s thinking at the highest level”.
The Horizon IT system is used by about 68,000 people in more than 11,500 branches and processes over 6m transactions.
Fujistu refused to comment on the report.
Poor accounting controls?
It’s still unclear whether accounting errors were caused by computer error, poor working practices or lax safeguards against fraud.
As Second Sight’s report notes: “Our experience over many years, shows that even apparently robust controls sometimes fail to work, or can be circumvented by a determined and skilful person.”
The firm declined to comment further on Horizon.
What can accountants and their clients learn from the Post Office’s accounting problems?
Vivian Cohen, partner at Frenkels Forensics, an accountancy firm specialising in forensic accounting, told AccountingWEB that he was hired to represent a sub-postmaster in court after the Horizon system showed a cash shortfall at the branch.
Cohen found that things weren’t so “clear cut” because Horizon wasn’t always reliable and other people in the Post Office had access to the accounting system – entering dates, money transactions and pension payments.
The sub-postmaster got a suspended sentence but Cohen said that he appeared “very stressed” and a “broken man” due to the stress of the court case.
“People can be sent to prison quite often on the basis of a computer error,” Cohen said.
Businesses can minimise the risk of accounting errors and fraud by regular reconciliations of transactions, which helps to spotting any cash shortfalls and working out what caused them, Cohen said.
He also said that accounting tasks such as cash handling, banking the cash and reconciling transactions should be done by separate people.
When Richard Anning, head of the IT faculty at the ICAEW, was first told about the alleged problems with Horizon in 2009 he said that an IT audit was needed.
He told AccountingWEB that the report on Horizon still leaves questions unanswered. "If the Post Office is reporting bugs [in Horizon] does it mean transactions are being double counted but it’s not apparent?”