The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Post Office misused funds due to the Public Treasury to finance “excessive withdrawals” by customers of its Savings Bank, the Auditor-General has revealed.

Unveiling the findings of a more than three-year investigation by his staff, Terrance Bastian disclosed that the Post Office was using funds from revenue-generating activities to meet withdrawal requests when clients did not have enough funds in their Savings Bank account.

“We noted during our audit that funds were being transferred from other Post Office bank accounts to facilitate excessive customer withdrawals,” the Auditor-General’s report revealed.

“The Post Office should not use funds derived from revenue activities to facilitate customer withdrawal requests. If this occurs, it is a reflection of the mismanagement of funds, whether in an operational or custodial capacity, by the Post Office Savings Bank.

“Utilising these funds should not be an option in facilitating a customer’s request for withdrawals as customer funds should be held in separate custody from the operations of the Post Office Savings Bank and the Post Office Department. Facilitating such transfer requests would lead to less revenue being deposited to the consolidated fund.”

The Auditor General demanded that the practice of misusing Post Office monies to finance customer withdrawals “cease with immediate effect”. And he implied that “excessive withdrawal” requests should not be honoured if customers did not have sufficient monies on their account.

The revelation that the Post Office is potentially jeopardising monies due to the Government is among a litany of breaches of the 1936 Savings Bank Act, and accompanying Rules, that were uncovered by the Auditor-General’s 40-month probe that began on New Year’s Day 2012.

Tribune Business revealed last week how Post Office Savings Bank customers were able to deposit and withdraw sums more than 100 times’ greater than legal limits, due to “significant internal control weaknesses”.

One account holder was able to withdraw more than $923,000 from the Post Office Savings Bank over the 15-months to April 8, 2015, even though the law and ‘Savings Bank Rules’ stipulate that account balances cannot exceed $6,000 in any one year.

Then there was the “inexplicable” case of another Post Office Savings Bank client who withdrew some $668,553 more than he had deposited over the three years between May 2012 and April 2015, even though the law, again, prohibited credit in excess of $6,000.

Whether anyone will be held accountable for breaches the Auditor-General said had exposed the Post Office Savings Bank to fraud and reputational risk remains to be seen.

Mr Bastian’s report illustrated how clients were able to breach the legal requirement that they have a direct beneficial ownership interest in no more than one Post Office Savings Bank account.

“We noted that one beneficial owner with an interest in other accounts at the Post Office Savings Bank was allowed to open more than one account,” the Auditor-General said. “The beneficial owner was allowed to withdraw funds in excess of balances reflected on the various ledgers/day sheets.”

The report said that when the Postmaster General requested this beneficial owner’s passbooks, she was supplied with copies of just the last pages.

“Due to the noted beneficial owner having several accounts at the Post Office Savings Bank, withdrawal transactions were occurring on accounts where there were insufficient funds to accommodate the withdrawal requests,” Mr Bastian said.

“It appeared as if this customer was allowed to transact on the various accounts held with the Post Office Savings Bank with limited, or without, any verification or reconciliation of the different accounts to ensure funds were not only available, but available on the pass book on which the request was made.”

The Auditor-General urged that all non-compliant accounts be closed, and that all passbooks be inspected “to ensure the accountability of transactions”.

Among the other findings were that the Post Office Savings Bank was issuing instructions to Bank of the Bahamas to draft cheques that were not given to authorised signatories on the account.

“The Post Office Savings Bank should not be honouring verbal requests from account holders to turn their funds over to another person,” the Auditor-General said.

“This would make the Post Office Savings Bank liable for the funds released if the beneficial owner claims that he/she never gave such a request to the Post Office Savings Bank.”

The report called for the Post Office Savings Bank to obtain authorisation letters from depositors confirming that another person could transact business on their behalf.

Mr Bastian’s team also found that the Post Office Savings Bank was not calculating interest on customer accounts in a timely manner, thereby preventing a person’s “right and access to all of their funds”. They urged that a computer system be installed to correct this.

“Due to the Post Office not having an automated system, the only way to ensure instances of fraud are minimised is to update the customer ledger on a systematic and timely basis,” the report said.

“Otherwise, the Post Office Savings Bank would not be able to determine whether a customer presenting a passbook for withdrawal has legitimate funds on account with the Post Office Savings Bank.”

Ledger updates, the Auditor-General found, were being impeded because Post Office sub-stations in New Providence and the Family Islands were not bringing customer accounts up-to-date with head office in a timely manner.

Bank fees for managers’ cheques and bank drafts for payment to customers were being “absorbed” by the Post Office Savings Bank rather than the client, increasing costs.

“The practice of honouring a customer’s request for manager’s cheques/bank drafts causes the Post Office Savings Bank to pay for a service out of public funds without the appropriate authority to use public funds for such services,” the Auditor-General’s report said.

It added that the “haphazard” nature of record-keeping had impeded the investigation, while both a lack of co-operation from Post Office Savings Bank staff and paucity of available information were breaches of their constitutional duty to assist the Auditor-General.