The Post Office Horizon accounting scandal is back in the news. David Winch looks back over the case.
There have been over 150 cases in which sub-postmasters have been accused of dishonesty in relation to cash shortfalls but have claimed that the Post Office software system, known as Horizon, is the culprit.
Typically what happens is that Horizon flags up an apparent shortfall in cash. Under their contracts sub-postmasters are required to make good any cash shortfalls. But what if the sub-postmaster does not believe any shortfall has really occurred?
One seemingly attractive option is for the sub-postmaster to accept the cash figure shown on the Horizon system in the hope that there has simply been a hiccup which will resolve itself in a few days or that the error has been caused by cash in transit or some other temporary issue.
But by accepting that they have cash which actually they do not, sub-postmasters can end up in hot water. A shortfall has been concealed which they would be obliged to make good if it were revealed.
If the issue does not resolve itself the sub-postmaster finds himself continually making false statements concerning his cash on hand.
When Post Office internal auditors make a spot check they will discover a dishonest sub-postmaster and a cash shortfall. Typically the sub-postmaster will be formally interviewed under caution, he will admit making false returns on the system and will face prosecution.
In these circumstances sub-postmasters and mistresses may be prosecuted for theft of the apparently missing cash, but without proof of the actual theft of money. In the light of any admission of making false returns, the outcome may be a guilty plea to an alternative charge of ‘false accounting’.
But the sub-postmasters understandably complain that this scenario involves an injustice and a failure to investigate alleged problems with the Horizon system. They complain that, not unlike a Wild West sheriff in a Hollywood movie, the Post Office are inclined to “shoot first and ask questions afterwards.
After considerable pressure the Post Office appointed independent forensic accountants, Second Sight, to carry out an investigation. The organisation also set up working party and arrangements for mediation in disputed cases.
But friction developed between the forensic accountants, Second Sight, and the client. The accountants claimed that the Post Office withheld relevant documents.
The Post Office then terminated the accountants’ contract and disbanded the working party. Second Sight nonetheless produced a confidential report, but the Post Office did not accept the conclusions.
In extracts from the report published by BBC reporter Nick Wallis, the forensic accountants concluded: “For the Horizon System to be considered fully ‘fit for purpose’ for all users, it would, in our opinion, need to accurately record and process, with a high degere of error repellency, the full range of products and services offered by Post Office, whilst providing a clear transactional audit trail allowing easy investigation of any problems and errors that arise. The cases that we have reviewed demonstrate that this design objective has not always been achieved.”
The Post Office denies any suggestion it improperly withheld information from the accountants or that serious deficiencies exist in the Horizon system. The Post Office published a report on the situation on its website and said there “has been an exhaustive and informative process which has confirmed that there are no system-wide problems with our computer system and associated processes” and that they “will now look to resolve the final outstanding cases as quickly as possible”.
Nevertheless a self-help organisation set up by the sub-postmasters, the Justice for Sub-postmasters Alliance, remains dissatisfied and an enquiry by the Parliamentary Select Committee for Business, Innovation & Skills resulted in a letter to the Secretary of State last month referring to a “lamentable lack of information provided to Second Sight” and urging the government to become “actively engaged in investigating these concerns” and to take steps to ensure that relevant documents are not destroyed.
It does seem that the Post Office were initially willing to appoint independent forensic accountants but then were uncomfortable with the direction in which those accountants’ investigations were going and the conclusions they were reaching. If they were expecting a whitewash they were disappointed.
David Winch is a forensic accountant and expert witness specialising in crime and proceeds of crime, and is a frequent contributor to AccountingWEB. He also leads AccountingWEB's Money laundering and crime discussion group.
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David Winch B.Com, F.C.A. has had over 30 years experience in accountancy, audit and tax matters with a wide variety of firms and their clients ranging from the smallest to major multi-nationals. David is a director of MLRO Support Ltd http://www.MLROsupport.co.uk a company which offers...