We’re not here to throw shade on anyone: accounting is a finicky business. Even the biggest, most generously-funded finance teams are often overworked and at the mercy of complex or inefficient workflows that make mistakes all too frequent.
We’ve compiled a list of some of the biggest accounting fails of the year so far — not to shame the poor finance teams responsible, but to show that anyone can make a costly error, no matter how big they are…
The Pentagon’s $3 billion blunder
Question: who finds an extra $3 billion down the back of the couch? The answer to this riddle was unexpectedly provided by the US government in May 2023, when an internal audit by the Defense Department revealed they’d overvalued weapons and equipment sent to Ukraine to the tune of $3bn. It turns out the department was making estimates based on new hardware, as opposed to the older equipment being used to support the Ukrainian war effort.
As far as accounting errors go, this is the good kind: the Defense Department now has an extra $3bn in defense funds to support the Ukrainian counteroffensive. But on the flipside, those resources could have been allocated sooner had the error not been made. The presidential military budget request for the 2023 fiscal year was $842 billion. If a government department with those kinds of resources can muddle its accounts, then anyone can.
Massachusetts’ massive error
Incredibly, the Pentagon’s was not the only multi-billion dollar accounting error to emerge in the past month. The State of Massachusetts’ $2.5bn blunder is a classic example of overwork and overwhelm. Massachusetts mistakenly spent $2.5bn of federal funds to cover jobless claims, when those claims should in fact have been covered by the state. The problem arose during the pandemic, when the Department of Unemployment Assistance was overwhelmed with a barrage of new jobless claims and federal pandemic benefits.
While the errors occurred during the fiscal years of 2020-22, they only came to light during a routine audit this year. The concern is that Massachusetts will be required to reimburse the federal government, and that this $2.5bn shortfall must be made up by employers via the UI system. Either way, it’s an example of how finance departments can become stretched and vulnerable during times of crisis.
University of Hartford hit hard
The University of Hartford was preparing for a major campus renovation when a miscalculation landed them in hot water. Calculations were made based on the university’s budgetary expenses rather than its year-to-date actuals, meaning that it must now repay millions of dollars in Series P Bonds claimed in error.
Sadly, the person responsible for the error has since lost their job, while the finance department is now under new leadership. A comprehensive statement by the university reveals the extent of the error, as well as some of the issues that contributed to it.
“Colleges and universities nationally, including institutions with strong reputations like the University of Hartford, are all currently navigating similar challenges, including pandemic recovery, increased competition, and inflation.”
Mistakes are high for cannabis company
A major player in the legal cannabis industry saw its stock price plummet 14% after an accounting fail was made public. The celebrity-endorsed CBD sports drink company BioSteel revealed this year that there were numerous “material misstatements” in its reporting for the first three quarters of 2022. As a result, its financial statements for the fiscal year “should no longer be relied upon”.
The company will be required to refile statements for this period, and informed investors that it cannot provide assurance no further errors will be identified. It also failed to elaborate on what was meant by “material misstatements”. For parent company Canopy Growth Corporation, this accounting error piles on additional misery at a time when the business has been forced to oust its co-founder while facing accusations of overspending.
While high-profile accounting fails can be entertaining to read about, they’re no laughing matter for the companies and institutions involved. In the examples above, we’ve seen how an accounting blunder might mean a multibillion-dollar discrepancy, a reputation left in tatters, or a tanking stock market value. And on a personal level, it can even lead to dismissal.
Accounting is difficult, and to err is human — particularly for finance professionals who might be overworked or burned out. Quadient Accounts Payable Automation by Beanworks takes the complexity out of accounts payable — automating tasks like manual data entry, invoice processing and payments to radically reduce the risk of human error. Schedule a demo today to cut out your risk of making next year’s list of accounting fails, or read this list of similar blunders from 2020.
