By Daniel Hunter

The Post Office failed to find out why there were large cash shortfalls at sub-branches before starting legal proceedings against sub-postmasters, a report has found.

The report investigated after concerns were raised by MPs in 2012. Sub-postmasters claimed unfair dismissals and wrongful conviction after the company claimed civil and legal proceedings.

The Post Office was quick to strongly deny the conclusion of the report.

Sub-postmasters' contracts contain clauses that force them to make-up the difference if the cash left at the branch does not match computer records.

That resulted in a number of postmasters facing large payments over shortfalls. It often left them sacked, sued or prosecuted for theft if they did not or could not pay.

The independent investigation by forensic accountants Second Sight found that, in most cases, the Post Office failed to investigate the root cause of the shortfalls before starting legal proceedings.

In 2009, sub-postmasters launched the Justice for Sub-postmasters Alliance (JFSA) and registered an interest in suing the Post Office over its Horizon computer system which records its transactions in the UK. But no legal action has been taken to date.

The report said that the shortfalls could have been caused by cyber attack, failure in the IT system or human error.

The Post Office also failed to hand over relevant documents deemed necessary by accountants investigating the cases.

A Post Office spokesperson said: "Over the past three years there have been exhaustive investigations which have not found any evidence of systemic problems with the Horizon system.

"The mediation scheme was set up to address individual complaints and that is what we have gone to great lengths to do - a number are now resolved. The complaints are considered on their facts and substance."