A Horizon system “operational defect” brought to the attention of the Post Office in 2019, but left unresolved, could be at the root of unexplained discrepancies which subpostmasters were blamed for, according to a forensic accountant who helped expose the Post Office scandal.
Ron Warmington at forensic accountancy firm Second Sight has written to the Post Office scandal public inquiry warning that current subpostmasters might not be aware of the issue.
The defect described by the long-serving subpostmaster who reported it to the Post Office in 2019, as “the part payment cash discrepancy issue”, could have seen Post Office branch customers receiving extra cash from subpostmasters over the years without realising.
The revelation comes at a time when the Post Office is experiencing large volumes of unexplained accounting shortfalls and using millions of pounds of taxpayer money to cover them.
The defect was brought to the attention of Computer Weekly by former subpostmaster Denis O’Donnell, who ran a branch in Prestatyn, Wales, for decades.
Operational defect
Warmington described what he has seen as an “operational platform defect” rather than a software bug. A Horizon screen icon which has two opposite uses, allowing the subpostmaster to both take money and pay money, is at the centre of the issue.
When multiple transactions, including in and out payments, are held at the same time in what is known as a “stack”, Horizon can make a payment to the customer but record it as a payment to the branch, therefore creating an instant discrepancy.
“What this means is that potentially substantial amounts of money will have been paid over to unsuspecting customers and charged to subpostmasters,” he said.
In June 2019, O’Donnell first alerted the Post Office and sent letters to senior executives including former CEO Nick Read and Mark Davies, who headed up the Post Office’s communications department, until December 2019.
His first letter, on 3 June 2019, was to Davies, stating it was “regarding a possible systemic problem”. In July, following a second letter, Davies replied. He wrote that the Post Office was looking into the problem he reported. O’Donnell continued to write to the Post Office and was repeatedly told, by various Post Office staff, that they were looking into it.
This was only six months after the Post Office had been defeated in the High Court by subpostmasters led by Sir Alan Bates, who proved Horizon system errors were causing the accounting shortfalls they were blamed for.
‘Incredibly frustrating’
O’Donnell said it was “incredibly frustrating” dealing with the Post Office over this issue. “I can’t tell you how much it’s cost me in terms of just frustration towards them,” he said. “I spent years chasing them over this, and they tried to fob me off and told me that there was nothing wrong.
“We knew the problem was the way subpostmasters were trained to use the system,” added O’Donnell.
On 2 November 2021, he received an email from the Post Office informing him that it would not make any changes to the part payment process. The Post Office executive told O’Donnell that after engaging with other subpostmasters in a forum, it had concluded that any changes could “increase complexity for transactions”.
O’Donnell wrote again to Post Office CEO Read, who wrote back to him to inform him that he agreed with his Post Office colleague “not to make any changes to the process”.
At this point, two and a half years after his first letter, O’Donnell gave up chasing the Post Office over the issue.
He retired last year, but wanted the issue to be raised amid the continued balancing problems being experienced by subpostmasters.
Post Office comment
Computer Weekly asked the Post Office about the issue. Commenting on O’Donnell’s first incident, a spokesperson said: “Following a review of our records and based on the information so far provided to us, we believe that we have identified that the former postmaster for a branch in Prestatyn raised a request for support in July 2019. This related to an issue they were having in July 2019 when it came to processing customers’ gas and electricity top-ups on the Horizon system, and our records indicate the mistaken use of a ‘part cash’ button on the terminal. Our records indicate that this particular issue was resolved a few days later.”
But the wider issue was not resolved, as Nick Read’s letter to O’Donnell in 2021 confirmed, with no changes made to the process.
The Post Office spokesperson said: “Based on the information provided and the check of our records, we do not believe that this was a defect in the operational platform. We do believe improvements could have been made to Horizon to avoid this issue occurring.”
But one former Post Office worker, who wished to remain anonymous, told Computer Weekly: “When we were trained on Horizon in the late 1990s, [the issue] was a constant problem, but because it was explicitly trained, subpostmasters got the gist of it, and we always told them to use their heads as backup maths. Over the years, training has dwindled away, and people have become lazier mathematically, and yet the Post Office has never fixed the issue.”
He gave an example: “A customer comes in and wants to withdraw £100 from their bank account. The stack should say ‘pay £100’. If the same customer wanted to pay a bill of £20, the system will say ‘pay £80’. But if the customer gave £20 to the clerk in that same transaction and the clerk pressed the part cash £20, the system will say ‘pay £120’.”
Public inquiry notified
But, on being informed about the issue by Computer Weekly and O’Donnell, Warmington at Second Sight found it “sufficiently serious” enough to write to the Post Office scandal public inquiry to report what he had learned.
“I’ve been informed about a still-uncorrected system [defect] that will, without doubt, have caused shortfalls in branches and indeed is likely still to be causing undetectable shortfalls,” he said.
“The now-retired SPM who discovered this [defect] first reported it to Post Office way back in June of 2019. He thereafter diligently, persistently and honourably followed up with Post Office senior management, including Mark Davies and Nick Read, rather than informing the media. And yet … not only does the bug remain uncorrected, but current subpostmasters remain ignorant of it and are therefore likely to be suffering from it without ever knowing that they’ve been impacted by it, other than by experiencing mysterious shortfalls.
“I appreciate that the inquiry’s evidence-gathering stage has now ended, but I regard this matter to be sufficiently serious that it needs to be raised,” said Warmington. “It is hard to avoid the conclusion that Post Office management has once again intentionally covered up a very significant matter.”
The Post Office said: “We are happy to re-review our records in light of any further information provided.”
Erratic figures
Horizon continues to produce erratic figures in branch accounts, which the Post Office can’t explain, with millions of pounds being written off.
According to a freedom of information response to Computer Weekly from the Post Office, in the past two years, subpostmasters identified more than 16,000 discrepancies, including both account shortfalls and surpluses.
The taxpayer-owned business wrote off £11.6m in unidentified shortfalls, subsequently recorded on the Horizon system as a loss, in its most recent financial year. In the previous year, it wrote off £10.4m as losses for the same reason.
These are shortfalls where the Post Office cannot identify the cause.
The publication of an independent report into the Horizon system today, carried out by Kroll, is expected soon.
The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered due to Horizon accounting software, which led to the most widespread miscarriage of justice in British history (see below timeline of Computer Weekly articles about the scandal since 2009).
Read: Everything you need to know about the Post Office scandal.
