Post Office scandal - a lesson in reputable reconciliation

Ross McGee
Ross McGee

Wherever there is a till, there is money in movement. From purchaser to cashier, cashier to customer, and branch manager to wider organisation, money is constantly changing hands. At the centre of all these movements have always been people deemed trustworthy, none more so than sub-postmasters and sub-postmistresses.

Not only is the profession responsible for the money of Post Office – a brand which was keen to boast how it was one of the most trusted in the UK in 2018 – branches, they are also seen as the pillar of many communities. When it was claimed that hundreds of sub-postmasters and sub-postmistresses were illegally taking money out of the Post Office, it was therefore a surprise, a shock, and eventually a scandal.

Since 1999, people caught up in this wrongdoing have had their lives turned upside down, served jail sentences, lost their entire savings and endured more dreadful events. Most harrowing of all is the fact that what they were put through was due to faulty accounting software rather than any fault of their own.  

Whilst ITV’s latest drama, Mr Bates vs. The Post Office, emotionally reveals the personal extent of damage this saga led to, it also lays bare the importance of accurate and auditable accounting practices. Discounting the manipulation, the greed, and the extraordinary cover up, how then could the “most widespread miscarriage of justice in UK history” have been averted by proper financial activities?

Reconciliation, part and parcel of retail

Post Offices pride themselves on offering a local, in person destination for people to conduct many fundamental tasks such as buying stamps, posting parcels, banking, managing pensions, taking out insurance, and more. As such, in any Post Office, a lot of money changes hands.

To ensure that the money found within a till is correct after a long day of trading, cash reconciliation must therefore take place. This forms just part of the process of balancing the accounts though of an individual branch. In addition, cash and card transactions must both be accounted for too via bank reconciliation, adding a digital element to the equation.

However, no matter whether goods and services are paid for via cash, card, cheque or invoice, when it comes to reconciling figures from these sources, the same principle is always followed – figures from one set of internal data, must match figures from external data. If an anomaly exists, it is highly likely that an error or fraud has occurred.

Despite sounding simple, it is all too easy to make a single mistake of just a few digits and cause figures to deviate from their true standing. For example, when conducting cash reconciliation manually, two £10 notes could easily be stuck together and only counted as £10. Moreover, an error such as this could have a knock-on effect on bank reconciliation due to it leading to a cashbook not having the right data when cross-referenced with a bank statement.

Ultimately, reconciliation – something which sub-postmasters and sub-postmistresses, plus others in retail are familiar with – is a task which requires tremendous attention to detail and at the same time, the acceptance that errors can arise when done manually.

The letter of the law

Unfortunately, acknowledgement of the fact that errors can occur when doing accounts led to many sub-postmasters and sub-postmistresses initially believing that the Post Offices’ newly adopted accounting software, Horizon, was infallible. In other words, if it said that they had calculated their figures incorrectly, it was telling the truth.

Over time this led to variances in figures getting larger and larger but only in one direction, that of loss. Horizon would state that a sub-postmaster's or sub-postmistress' account was £100 short before increasing this amount time and time again. As this continued to go unresolved, it was not uncommon for sub-postmaster's and sub-postmistresses to be accused of having stolen figures such as £74,000.

Due to not fully understood contracts between the Post Office and sub-postmasters and sub-postmistresses stating that all losses from branches must be made good personally, the latter often felt that they were obliged by law to cover the supposed shortfalls. Unfortunately, the same opinion was held by the courts, leading to over 900 sub-postmasters and sub-postmistresses being prosecuted for fraud, false accounting and/or theft.

Stamp down on corruption

Fortunately, 93 cases have now been overturned and more should be set to follow due to the combined efforts of journalists, whistleblowers, MPs and the troves of sub-postmasters and sub-postmistresses who have spent years seeking to clear their names. However, in reality, irreversible damage has unfortunately been done to far too many lives. So, what are some examples of actions which should have been taken from a financial perspective to stop things going wrong for so long?

Employing trusted software

Fujitsu’s Horizon was dubbed as the “biggest non-military IT project in Europe” when first launched in the Post Office, making it a remarkable feat on paper. However, large, unprecedented projects have a tendency to be susceptible to anything from minor teething errors to full-blown catastrophes.

When it comes to something as serious as managing the money of the Post Office, arguably, failsafes should have been in place in case the Horizon software was not up to the job.  After all, reconciliation is actioned to produce a definitive result, meaning that it must be done correctly.

That’s why it is always best to not just work with any technology provider but one that is a dedicated expert in a field. This is something which in contrast to the Post Office, other large name brands like Admiral, The Co-op, Young’s and Co. Brewery, and more can testify to having formed long-lasting partnerships with Aurum and our 20 years' experience exclusively in reconciliation and data management.

Aurum Solutions customer quote from Admiral Insurance firm explaining that Aurum ensures they can balance back to the penny so they never have anything in an unallocated cash account.

Spotting fraud and unauthorised payments early

It is all well and good being able to spot that figures do not add up after a period of a week or even a month; however, what is more important is being able to pinpoint why these issues are present so that blame doesn’t fall on the wrong party. Achieving so becomes a lot easier when things are done on a granular level and at frequent intervals.

Automatic reconciliation with Aurum delivers precisely that. By reconciling infinite amounts of data from any number of sources in seconds, ensuring data integrity can be scheduled for as frequently as desired, minimising the time between fraud taking place and being spotted for resolution.

In addition, thanks to Aurum consolidating data within one fully customisable platform, reconciled data can be manipulated and drilled down into, to help reveal the source of fraudulent activity. As a result, with the likes of Aurum, suspicious activity is highlighted swiftly and accurately rather than being given the time and means to burrow further and further into larger amounts of unreconciled, unmanaged, incomprehensible data.

Post-Horizon, let's do reconciliation right

In total, the scandal caused by Fujitsu’s faulty accounting software has ended up costing the UK government, the Post Office and those who wrongly suffered due to it, billions of pounds. However, this incomprehensible transgression is about more than just money.

It is about how the law operates, the integrity of investigations, trustworthiness, reputations, livelihoods, mental health, families and individuals. Automated reconciliation acting as an indiscriminate method to check figures would by no means have been able to ameliorate all the wrongdoings of this scandal but it could have helped ensured data integrity, accurate audit trails and the presence of a reputable financial control.

To book a demo with the experts in automating reconciliation for 20 years, get in touch with Aurum Solutions today.

Ross McGee
Ross McGee

Content and Community Marketing Manager

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Ross McGee is a marketing manager at Aurum Solutions who deep dives into financial processes, technology, and best practices to share insights that help finance professionals of all levels maximise their potential.

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