ROYAL MAIL CONFIDENTIAL
Audit Rating:
Substantial Assurance
POST OFFICE LTD
HORIZON ELECTRONIC
CASH ACCOUNT REVIEW
REPORT DISTRIBUTION
To:
For Information:
Antony Smyth
David Mills
Peter Corbett
Dave Miller
Vicky Noble
Sue Harding
Alan Barrie
Sue Lowther
Rod Ismay
Derek Foster
MARCH 2004
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Ernst & Young, External Auditors
Chief Executive, Post Office Ltd
Finance Director, Post Office Ltd
Chief Operating Officer, Post Office Ltd
Head of Client Accounting & Cash Management, Post
Office Ltd
Programme Manager IMPACT, Post Office Ltd
IT Director, Post Officer Ltd
Head of Information Security, Post Office Ltd
Head of Risk and Control, Post Office Ltd
Internal Audit & Risk Management Director
EXECUTIVE SUMMARY
The Horizon system uses an automated cash account to record transactions carried out over the counter at
post offices. The transaction information is transferred electronically to the Counter Business Database
REPORT REF: AR5703
Internal Audit & Risk Management (IA&RM)
Telephone:
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(CBDB) for further processing. The Post Office Ltd financial ledger records transaction summary
information from CBDB.
On an annual basis, to support Ernst & Young in their review of Post Office Ltd’s financial statements,
IA&RM undertake a review of the Horizon system electronic cash account and the system interfaces to
CBDB. The purpose of the review is to provide assurance on the effectiveness of the controls over the
Horizon electronic cash account and the integrity of the data held on the Horizon and CBDB systems. In
accordance with the terms of reference, the review covered all transactions undertaken by Great Moor post
office for cash account week 35, 2003/04.
IA&RM can provide substantial assurance on the effectiveness of the controls over the Horizon system
electronic cash account. No issues were identified over the integrity of the data held on the Horizon and
CBDB systems. In particular:
e — The cash account for week 35 for Great Moor post office was verified to the underlying documentation
and reconciled to both the Horizon and CBDB systems. No discrepancies were found during the
reconciliation
¢ Controls to ensure that the transaction data was captured and transferred correctly at each stage of the
process were in place
* — Processes to identify errors in the cash account were in place
« — Processes to identify and reconcile any errors that occurred during the interface between the systems
were in place.
The review identified one issue in relation to the standing reference data held on the Reference Data System
for the Great Moor post office. The office closing time for Wednesday was logged as 13:00 on the system
when in fact it remained open until 17:30. This has no effect on the cash account as the transactions are
allocated to the correct cash account week due to the date and time markers that accompany them. The
discrepancy in reference data causes a delay of one day in reporting any Automated Payment transactions.
In the case of Great Moor the value of transactions affected on the week of the test was not material.
The Reference Data team confirmed that a least one or two cases a month are identified where branches
have incorrect opening times on the system.
The IMPACT Programme, which is significantly changing the cash account and settlement process within
Post Office Ltd, will rely on Reference Data to ensure that the new system operates effectively. As a result,
reference data needs to be effectively maintained.
Agreed Action
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As part of business as usual the Client Accounting & Cash Management Team, supported by Impact
Programme, to ensure that verification of the Reference Data takes place.
Owner: Vicky Noble, Head of Client Accounting & Cash Management, Sue Harding, Programme
Manager IMPACT
Timescale: 30 November 2004
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