Grey Day gives little away

Chris Day, former Post Office Chief Financial Office had all the hallmarks of a low-wattage witness. He met that expectation square on. I think I was the only journalist present today. More fool me.

Taken at snail’s pace through multiple documents we’ve seen before, Day was unable to see the real risks in the Horizon system from the moment he joined in August 2011, to when he left in December 2014.

One of the first things to hit his desk was the Ismay report. Day was Rod Ismay’s boss. We have met Mr Ismay before.

Today Catriona Hodge, asking questions on behalf of the Inquiry, noted the Ismay report contained evidence about a number of software bugs, one of which had been affecting account balances in Post Office for years. Neither the Post Office nor Fujitsu (until that year) had properly diagnosed, let alone fixed it.

Hodge said: “Bearing in mind that this fault appears to have persisted for a period of five years, undiagnosed and unresolved in the Horizon system, would you have not entertained the possibility that there would be affected branches where accounting errors hadn’t been detected and adequately resolved?”

Catriona Hodge

Day replied: “I viewed this series of bugs or glitches that had happened historically as being things which typically happen in a large IT computer system… that they had been addressed.”

The incuriosity about Horizon errors and their capacity to impact the integrity of the financial system on which the Post Office was dependent seems to have been a feature of Mr Day’s tenure.

He was taken to the conclusion of Mr Ismay’s report, which argues against an independent review of the Horizon system, stating: “it is important to be crystal clear about any review if one were commissioned. Any investigation would need to be disclosed in court. Although we would be doing the review to comfort others, any perception the poll doubts its own systems would mean that all criminal prosecutions would have to be stayed. It would also beg a question for the Court of Appeal over past prosecutions and imprisonments.”

Mr Day conceded this was “odd”, but told the Inquiry: “I don’t recall having thought at the time that this was odd… my primary focus would have been to understand issues that might relate to the integrity of Post Office’s financial data. Regrettably, I don’t think I would have been focusing so much on what might need to be disclosed in court as a result of having an independent review commissioned.”

Second Sight’s Interim Report

Two years into Day’s tenure, Second Sight’s interim report was produced, naming two significant bugs which had caused problems with Horizon. Hodge wanted to focus on the minutes from the 16 July Post Office board meeting which discussed the report. She read out minute b) under the “Horizon” heading, which stated “the board were concerned that the review opened the business up to claims for wrongful prosecution”. Then Hodge referred to Day’s witness statement in which he wrote: “I do not recall who made that comment that led to the minute”, and “I don’t recall what the specific basis for this concern was.”

Hodge explored this a little: “It might be suggested in your evidence that you’re seeking to distance yourself from the seriousness and significance of the concerns that are being voiced at this stage, as to the implications that Second Sight’s findings had for post offices past criminal convictions.”

Day disagreed, telling Hodge: “My views were informed by periodic updates provided generally by the CEO, occasionally by the General Counsel. So I think the summary in the minutes under b) is exactly what my understanding would have been at the time.”

Nonetheless, Day was told by the Board to (in Hodge’s words): “investigate the insurance position and to ensure that Royal Mail Group and Post Office Limited notified their insurers of the review’s findings.” Hodge added added “one of the aspects of the concerns of the board was not simply the businesses’ liability, but it was the individual liability of directors. Is that correct?”

Day agreed it was. Hodge asked if it was of personal concern. Day replied: “I don’t recall having a concern and going back through all of the documentation it’s clear that there were lots of different conversations around insurance both at the board and outside of the board and different non-execs expressing concern about the lack of clarity.”

Hodge pushed him: “What was your perception at the time as to where the focus lay as between the board’s interest in their own exposure and the exposure of the business?”

Day replied: “My recollection is that the very first conversations were… around D&O [Directors and Officers – ie their own exposure], but I have to caveat that with, I didn’t have a full and detailed understanding of exactly which policies might apply in which circumstances.”

A de-risked annual report

It was hard going. At one point Hodge called Mr Day “Mr Grey”, an understandable error. After lunch the core representatives for Subpostmasters had a go. Ed Henry KC took Day to an Audit and Risk Committee (ARC) report from 20 Jan 2014 which noted “There is a risk that allegations relating to the integrity of the Horizon system, if not contained, could raise wider questions over the robustness of our core systems and our ability to operate, damaging, amongst other matters, current partnerships, new areas of expansion, and public and government confidence.”

Henry then took Day to his final annual report, produced in June 2014. He wanted to know why there was no mention at all of the risk of allegations relating to the integrity of the Horizon system. Day replied: “at no stage did we seek to diminish or cover up the ongoing concerns that there were around Horizon if that’s what you’re alluding to… The auditors were kept abreast at all times of the findings of the Second Sight review. They reviewed the possibility at all times for contingent liabilities and/or provisions that would need to be made.”

“Really?” asked Henry, wearily.

“Yeah”, replied Day “My focus would be very much on… I need to disclose as much as possible to the auditors so that they can make a qualified judgment on whether they need to recommend creating a contingent liability or a provision.”

Day could not explain why the Post Office board decided to remove all reference to Project Sparrow from the same annual report nor the decision to refer the issues raised by the Clarke Advice to the Post Office’s insurers, stating on the latter point: “Although it clearly was a material risk, I don’t think the fact of needing to report it to our broker had a bearing on what I would show in the annual report and accounts.”

Where’s the blimmin’ money gone?

Sam Stein KC wanted to know more about accounting for shortfalls within the Post Office. This, at least, is something you’d expect a CFO to be all over. Day was so detached it seemed as if at any moment he might float free.

Stein started with the basics: “Do you agree that on occasions the Horizon system would suggest there’s a shortfall, in other words that the branch needed to pay a sum of money to correct, to balance the system?”

“That could happen”, replied Day.

“Mr Day, you must have been following this matter because it’s been part of the inquiry now for, and indeed history of this for, quite some time. Subpostmasters being confronted with a suggested shortfall in their accounts. You must be aware of that.”

Day seemed reluctant to commit to this fundamental idea. “That’s a possibility. I understand that, yes.”

Stein was incredulous. “What do you mean a possibility? Many, many Subpostmasters say it actually happened. It’s not just a possibility Mr Day.”

Super (frustrated) Sam Stein KC

Day conceded that Subpostmasters might have shortfalls in their accounts. Having got him to the starting line, Stein wanted to know where that shortfall, or debit went in the Post Office system.

“Do you agree that to hold a debit against the Subpostmaster would require a credit? To be posted to the Post Office financial accounts?”

“Not necessarily”, replied Day. “Because as I understood it, mismatches would be investigated. They wouldn’t automatically be put through as a debit to the postmaster and a credit to the Post Office. It wouldn’t work that way. The two sides of the transaction would be, attempt to be married up, where they didn’t marry up completely, they would be investigated. That would either result in a transaction correction or transaction adjustment, which the postmaster would have full visibility of it. In far more cases, as I understand it… there would be a credit balance in the suspense account which would result from the client company having demanded less of a transaction, having expected less from a transaction than the postmaster had input at their end ie the vast majority of credit balances would relay to discrepancies between Post Office at the centre and clients, rather than Subpostmasters.”

As we pondered that answer Day volunteered he found it “regrettable” that the “onus was on the Postmaster to prove that through evidence [the shortfall] was not their fault.” He paused. “I think that’s very unfortunate.”

“Unfortunate may be a slight understatement”, noted Stein.

Day agreed. What Day didn’t do was successfully explain where Subpostmaster discrepancies went within the Post Office, nor how they were accounted for. It wasn’t for want of asking.

Keeping us in suspense

Stein went back to the example of a branch discrepancy or shortfall which would raise a demand for it to be made good. “Do you agree that that would mean that there was a debit against the Subpostmaster or mistress in branch and that that would require a credit to be posted within the post office financial accounts?”

“I don’t think it’s as final as that”, replied Day. “I think it would have been in the suspense account of the Post Office pending resolution, pending investigation and again my view, my direct experience of suspense accounts would have been very much from the top down materiality. I accept that I wouldn’t have had visibility of sums which could be material to individual Subpostmasters.”

Stein told Day to forget about suspense accounts for the moment. “We know that on occasion, Subpostmasters were confronted with shortfalls. Those shortfalls weren’t identified to any individual transactions such as stamps. They were just told there’s money owing to Horizon, okay? Let’s just stay with that for a moment. Money was then paid in by a branch manager or Subpostmistress or employee at the branch and that money went into the accounts. Do you follow with me so far?”

Day did.
“Right”, said Stein. “The bank underwriting Post Office was the Bank of Ireland?”
“Yes.”
“So the actual money paid in either through a cash injection into the system or digital transaction actually went to the Bank of Ireland. Do you agree?”
Day was not sure.
“Eventually it would go to the Bank of Ireland, surely?” tried Stein. “They’re the bank that underwrites it. I’d be surprised if they went anywhere else.”
“No, that wasn’t my recollection”, said Day.
Stein was getting frustrated “Where did it go”, he asked, “did it go into bonuses?”

Day giving it back to Stein

“You may be right”, replied Day, eventually going back to a version of his original explanation – that “there would have been a fundamental mismatch in some part of the transaction that would need to have been investigated” which means the money would go into “suspense accounts”, because “that’s the only place it would go pending final accounting determination or treatment. It doesn’t automatically go into either the Bank of Ireland or the Post Office’s pocket. That’s not the way it would work. It would be an unreconciled item that would be investigated.”

After some more back-and-forth Day admitted: “I’m piecing together what what I now understand from other people’s evidence and from documentation at the time, because I had no reason to be that close to it.”

The penny dropped. “So you don’t know the answer to the question?” said Stein. “You’re saying this is your best guess, is that right?”
“Yes”, replied Day, simply.
“All right”, said Stein, giving up. “I think I’ve taken that about as far as I can.”

At the end of his evidence Day told the Inquiry: “It seems rather late now, but I would like to say that I’m extremely sorry for the devastating impact the Horizon scandal has had on so many postmasters and their families, and it’s extremely regrettable.”

Well, quite.

If you’re completely unhinged you might like to read my live tweets from today’s hearing, here.


The journalism on this blog is crowdfunded. If you would like to join the “secret email” newsletter, please consider making a one-off donation. The money is used to keep the contents of this website free. You will receive irregular, but informative email updates about the Post Office Horizon IT scandal.

27 responses to “Grey Day gives little away”

  1. I can’t believe Grey Day’s response concerning the provisions and contingent liabilities. It is NOT the auditors responsibility to include these in the financial statements. It is the business’s responsibility, and ultimately the CFO/FD. The auditor’s responsibility is to check that the financial statements give a true and fair view of the organisation’s financial performance and position.
    GREY DAY is UNBELIEVABLE. He is not fit for purpose.

  2. Stephen Phillips avatar
    Stephen Phillips

    For the benefit of those who do not understand double entry bookkeeping – which seems to include the KCs and the CFO :-

    When there is a shortfall between cash at a Branch and Horizons figure, payment in by the postmaster does not lead to ANY accounting entry. It simply makes the cash “correct”.

    If the Horizon balance is in fact wrong there will be a double entry balance somewhere. If that is found and corrected the discrepancy will reverse.

    If the postmaster pays in by crediting a PO Bank account the double entry THAT creates will bring the branch cash into agreement with Horizon.

    Surely the Inquiry has had expert advice on accountancy as well as employing half the bar?
    So far as I can see Horizon is not a double entry system anyway – more a computerised cashbook.

    Nor does it seem to preserve an audit trail. Rather it bungs everything into a big database from which records can – with difficulty – be recreated.

    Have the actual workings of Horizon been covered at an earlier stage of the inquiry? I only started to take interest recently.

    Or are they due to be covered later?

  3. Per the Post Office’s boastful 2012-13 Annual Report and Accounts:
    https://clarotesting.files.wordpress.com/2022/03/2013-pol-annual-report-accounts.pdf

    Chris Day
    Chief Financial Officer
    Chris Day joined the Post Office in August 2011
    from the BBC, where he had been Group Financial
    Controller since 2005. Prior to that, Chris spent 14
    years in FMCG with Grand Metropolitan/Diageo in
    a succession of treasury and corporate finance
    roles in the UK, and as Finance Director in the
    Netherlands and subsequently in Germany/
    Austria. Earlier in his career, Chris worked
    as a financial management consultant at KPMG,
    having started his career with Beecham Group.
    ————–

    I deduce therefrom that Day holds no accredited UK accounting qualification.

    Which figures. Another empty-headed PR guy.

  4. I wanted to ask Chris Day whether Jo Hamilton and Lee Castleton had bought Paula Vennells a new bike, put her children through private school or paid for an extension to her house.

  5. I am an accountant. Mr Day clearly never grasped the basics of accounting. His replies to Mr Stein’s simple questions are evidence he did not understand the basics of his responsibilities as CFO.

    The Detica Report (thanks James for the extracts and highlighting this) would have raised very loud alarm bells to any competent CFO.

    Did he put the findings of this Detica report to his Board?

    What actions did he take on this report?

    If the answers are No and None he was grossly negligent.

    His reply re Directors insurance says it all:

    “… I didn’t have a full and detailed understanding of exactly which policies might apply in which circumstances.”

  6. So he wound down the clock. Lightweight, or a well-prepared strategy of being the Inquiry witness equivalent of Scott Adams’ “Ted the Generic Guy”?

    1. This looks to me like a missed opportunity Mr Grey. Regarding the question of “Where has all the money gone?” Mr Grey appears to say that it went into a suspense account which was investigated and then posted somewhere else. Although I would not expect Mr Grey to know about the details at the time, given the massive national interest starting around 2019, the fact that he still does appear to know (or care) where the money went after it was investigated in the suspense account is astonishing. This would have been easily traceable. It is a shame that Mr Grey was not asked about why he was not interested in identifying were the money went after the suspense account. Sounds like everyone had fallen asleep long before this point.

  7. Kirstie Jenkins avatar
    Kirstie Jenkins

    Is it still the case that postmasters are contractually obliged to take responsibility for all discrepancies unless they can prove otherwise?

    They still have restricted access to systems and historical data, so who can investigate discrepancies now?

  8. Post Office branches were instructed to ‘declare their cash’ at the end of the working day. When I was a branch manager we started balancing the tills at 2pm every day – that is the clerk actually counted the cash on hand and ran the balance process which then generated a discrepancy figure (if there was one). We had many tills so once the first clerk had balanced their till the process moved to the next person on the counter and so on.
    At the end of the day (5.30pm) all the staff on the counter declared their cash again without recounting it. Therefore all the transactions done between the balancing time and the end of the day would not be accounted for in the final cash declaration – which could amount to £000’s.
    We were instructed to declare cash on all till stocks at the end of every working day – the reason given for that was the branch would fail to poll overnight if the cash declarations were not done.
    In other words, the final cash declarations made each night in branches bore little relation to what was actually there. This must have been widely known as there were many instructions issued to do end of day cash declarations, indeed branches were targeted on their performance on this.

  9. Good article Nick, which reflects well the tedious and torturous nature of today’s session.
    I’m astonished at the number of very well-remunerated POL executives and senior managers who have shown they have no grasp of the operation of the functions they were supposed to have led. Surely POL use basic accounting principles that any CFO would understand? Even if Day’s answer regarding POL’s treatment of discrepancies wasn’t necessarily what Mr Stein was expecting, surely it should have been clear and unequivocal? Day’s answers today had me repeatedly asking myself “What the hell was he paid to do?”.
    Regarding “incuriousity”: it’s very easy to not be curious about something you don’t care about, and the Inquiry has shown us that the majority of POL’s senior staff simply couldn’t give a rat’s tail-end about SPMs.

  10. Like any senior manager worth their salt, I thought Day had a pretty good go at, not so subtly, throwing Rod Ismay under the bus for the failure of the finance people in the PO to investigate the losses and irregularities properly.

  11. I wonder if the Inquiry barristers are looking in the wrong place? The Detica report is perhaps just as damaging to the Post Office as the Second Sight Interim Report. And we know from a FOIA request made by the indefatigable Alan Bates that the Detica Report was received in October 2013 by, among others, Chris Day:

    FOIA Response FOI2020 00679.pdf (whatdotheyknow.com)

    Chris Day was Chief Financial Officer and a POL Board member at the time. One of the Report’s main findings was that ‘The Post Office is not able to account fully for the whereabouts of significant values of cash in the network, particularly in the case of cash left in open transfers or moved to ATMs’. Surely POL’s external auditors should have been made aware by the CFO of this finding that ‘significant values of cash’ could not be accounted for?

    The devil is almost always in the detail. Paragraph 5.1.1.1. of the Detica Report is entitled ‘Discrepancy Between Cash on hand and declarations’. Detica looked at one hundred days of transaction data for all Post Office branches to compare the Cash on Hand, “COH”, amount and the daily cash declarations which were made by the branch manager or SPMR. The Report says: ‘In theory the two numbers should always balance, whilst in practice some deviation would be expected to account for errors or refunds.’

    But Detica found that, of 11,235 branches, 1,000 branches showed deviations greater than £10,000 or less than -£10,000. In other word 9 per cent of branches. That is a material percentage for such large deviations. The Detica Report went on to say: ‘These discrepancies cannot be attributed to purely fraud and non-compliance’.

    So, at face value, it appears that in October 2013 a main Board Director – the CFO – received a report telling him that the Post Office was not able to account fully for the whereabouts of significant values of cash in the network. And, moreover, that 9 per cent of branches experienced deviations greater than £10,000 or less than -£10,000 in daily cash reconciliations. And, tellingly, that ‘these discrepancies cannot be attributed to purely fraud and non-compliance’.

    A key line of defence from many at the top of POL has been that information was kept from them by POL’s lawyers.

    But the issue of unaccounted for cash and material problems with cash reconciliations appear to have been known by at least one member of the POL Board by October 2013. And according to the FOIA the Detica Report was also delivered to John Scott, Chris Aujard, Angela Van-Den Bogerd, Lesley Sewell and Paul Bleasby.

    Is it really conceivable that not one of these individuals ‘joined the dots’ about missing cash and Horizon?

    1. A quick scan of the pdf revealed a section ‘Difficulties extracting data’. Based upon a brief review the question arising in my mind is ‘What data was used by the PO to investigate discrepancies?’ It makes me wonder whether the courts relied upon PO/Fujitsu authority figures making assertions rather than finding the facts

  12. Presumably the money is still sat in the Post Office suspense account then? Yes I read the Report but I didn’t really read it properly seemed to be his evidence. Came from the BBC you could tell. It was clear that any reference to IT matters went straight over his head.

  13. I stopped watching this broken record player response to the inquiry after just a few minutes. All I needed to see were all the deliberate pauses between carefully selected words to know their was no genuine effort to assist the inquiry from this witness. Just another incurious morally broken cog in the POL fob off responsibility machinery.

  14. If he was still the CFO and seeing now the very deep financial liability faced by POL he would be really thinking hard about what he know and what he failed to read, to ask and to do.

  15. Thanks Nick, always enjoy reading your blog posts on this subject. (I was at the Lichfield theatre show/meeting incidentally).

  16. The absurdity of this CFO fumbling the simple question of the double entry for shortfalls and the flows represented by the double entry is utterly bewildering.

    1. As an accountant, I could not believe how he REFUSED to answer the very simple question of what account was used to balance out those entries being posted to suspense. he sounded like someone with no clue about how accounting works.

      1. They all pretend to have no clue about anything at all. I suspect they all got together before the inquiry and decided on a collective policy of affected stupidity and amnesia. However ignorance is not a defence – you cannot go to court and say “I do not remember robbing a bank” and get away with it.

    2. Mick Taylor FCA avatar
      Mick Taylor FCA

      He isn’t an accountant. His role @ KPMG was that of a consultant, i.e., a paid bullshi££er.

  17. Agreed very poor day……
    Saw no evil, heard no evil….there is no evil.
    Pure corporate attitude …..lets all stick together…we cant all be wrong.
    A very lightweight witness.

  18. Is this now over?…do we need to hear anymore from corporate dummies??
    Pass the files to the DPP and let them decide who can likely be found guilty of criminality….and PAY the truly offended against up to the financial recompense threshold mentioned by Mr Bates

    1. exactly

  19. I’m not a finance person, but I’ve been involved in the delivery of financial systems. In my experience, most finance people are really very concerned with transactions matching. So I’m glad someone asked about it today. I confess I rather glazed over when Day/Gray explained why it didn’t matter, but perhaps that was the effect he was going for. I look forward to the comments from those who are more qualified than I am.

    1. I am an accountant and let me say that yes transaction matching and balancing are absolutely essential, and he just didn’t answer the question about where the suspense funds were being allocated in the books. An embarrassment to finance professionals everywhere.

      1. I am also an accountant (retired) and found Mr Day’s evidence most unsatisfactory.
        He seemed gleeful that there was no mention in the minutes of the Andrew Parsons advice, claiming that he never saw it.

        A bit too gleeful, if you ask me. This advice related directly to his particular responsibilities and even if it were true that he was never shown the actual document, it doesn’t follow that he didn’t know what was in it.

        Unbelievable Jeff!!!!!

Leave a Reply

Your email address will not be published. Required fields are marked *

Archives

  • 2024
  • 2023
  • 2022
  • 2021


Subscribe For Latest Blog Updates

Tags

Alan Bates alice perkins Alwen Lyons Andrew Winn Andy Dunks Andy Parsons Bates v Post Office BBC Bonusgate CCRC Chris Aujard Clarke Advice False Accounts Fujitsu Gareth Jenkins Grabiner HCAB Horizon Hugh Flemington Ian Henderson Inquiry Interim Report Janet Skinner Jarnail Singh Lee Castleton Lord Arbuthnot Mark Davies Neuberger Nicki Arch Nick Read Noel Thomas Paula Vennells Paul Marshall Post Office Receipts and Payments mismatch bug Rob Wilson Rod Ismay Rodric Williams Second Sight Seema Misra ShEx Simon Clarke Susan Crichton Tracy Felstead UKGI

Categories