Accounting
Macy’s touted a metric that ended up being juiced for years by former employee
For years, Macy’s Inc. touted its ability to boost profits by cutting delivery costs and trimming other expenses on calls with Wall Street analysts. Then on Monday, the department store chain surprised investors by revealing that those very costs had become the source of an internal investigation into what the company has described as a multimillion-dollar employee plot to manipulate the metrics.
The retailer said the incident involved only one former employee, who had hidden as much as $154 million of delivery expenses since 2021. Cash was not taken from the company and the amount of hidden expenses is a small portion of the $4.36 billion of overall delivery costs incurred during that time.
Macy’s said it discovered the hidden expenses while the retailer was preparing its most recent quarterly earnings release, which was set to come out on Tuesday but was delayed due to the accounting issue.
The company said it launched a probe following the discovery but declined to answer why the apparently intentional accounting errors went undetected for nearly three years. Its auditor, KPMG, declined to comment. Macy’s also didn’t provide information on what the employee’s motive was, when the employee left, whether their departure was related to the events, or if the issue was being investigated by law enforcement. Macy’s hasn’t identified the employee.
Cutting the cost of delivering online orders has been a focus for the retailer in recent years as it aims to shore up profitability in the face of flagging sales.
To that effect, the retailer has been diversifying shipping carriers, reducing the distance its packages are sent and spearheading what CFO Adrian Mitchell recently called “process reengineering initiatives” on the company’s August earnings call.
A month later, Mitchell called the efforts one of the “key drivers in terms of expanding gross margin” at the annual Goldman Sachs retailing conference, where investors gathered to hear about the company’s turnaround plan under a new chief executive who took the helm earlier this year.
Macy’s is getting “our delivery expense under control for a lot of customers that are going to be receiving deliveries to their home,” said Mitchell, who joined Macy’s in 2020 from the Boston Consulting Group. He has mentioned delivery expenses in all but one of the 16 quarterly earnings calls that he’s participated in since joining the retailer.
It was a major boon for the retailer and its finance chief, who told Wall Street in May 2021 that the “largest headwind” for profits was its delivery expense. At the time, Mitchell said that the delivery expense accounted for nearly twice the drag on profits compared to the same period in 2019. The more that people shopped online, the bigger the delivery expense line item ratcheted up.
Checks and balances
To be sure, the amount of hidden expenses by the former employee is a small portion of overall delivery costs. Macy’s has been focused on cost cutting across the company, not just delivery expenses. And there’s no indication that Mitchell and other members of the company’s leadership team were aware of the single employee’s actions.
But the discovery raises questions about the checks and balances Macy’s has in place to ensure accurate accounting of its business activities, particularly around a metric its chief financial officer was keenly focused on. Macy’s declined to make its CFO available for an interview.
One possible scenario is that an accountant at Macy’s could have changed the internal coding of delivery transactions to charge those payments to the wrong account, according to Adriana Carpenter, a former accountant at auditor PwC who now serves as chief financial officer of expense management software company Emburse.
As a result, the payments may have been recorded as cash outflows, but the expense wouldn’t have been reported, said Carpenter, who does not have first-hand knowledge of Macy’s business practices.
A large company like Macy’s typically has controls in place to ensure such a scenario couldn’t occur but it’s unclear if that’s the case in this instance, she added. Macy’s declined to comment on its controls.
The size and duration of the incident also makes it likely that the Securities and Exchange Commission is investigating or will investigate, said Jim Barratt, a former SEC enforcement accountant and founder of Barratt Consulting Group.
The SEC, which regularly reviews company filings for unusual disclosures, said it doesn’t comment on the “existence or nonexistence of a possible investigation.” Macy’s declined to comment on any possible external investigations.
The disclosure also draws attention to the company as a whole, not just the unnamed employee singled out in the press release, Barratt said. “Accounting entries aren’t made by one person,” he said. “It takes more than one person.”
Treasury Secretary Scott Bessent named Internal Revenue Service chief operating officer Melanie Krause as acting commissioner after the retirement of acting commissioner Douglas O’Donnell.
O’Donnell has been acting commissioner since January, taking over from former IRS commissioner Danny Werfel, who announced he would be
“The IRS has been my professional home for 38 years,” O’Donnell said in a statement Tuesday. “I care deeply about the institution and its people and am confident that Melanie will be an outstanding steward of the Service until a new Commissioner is confirmed.”
The IRS has been going through a period of turmoil, with an estimated
Senate confirmation hearings have not yet been scheduled for Long, but he is expected to be questioned about his record of
Until Long is confirmed, IRS COO Krause will now move into O’Donnell’s deputy commissioner role and serve as acting commissioner of the nation’s tax agency.
“On behalf of the Treasury Department, I want to thank Doug O’Donnell for his decades of public service and dedication to the nation’s taxpayers,” Bessent said in a statement Tuesday. “He has been a remarkable public servant, and I wish him the best in retirement. At the same time, Melanie Krause and the agency’s leadership team are well positioned to serve during this critical period for the nation in advance of the April tax deadline.”
Krause has served as IRS COO since April 2024 after acting as deputy commissioner of operations support since January of the same year. As COO, she oversees the operations including the Chief Financial Officer; Chief Risk Office; Facilities Management and Security Services; Human Capital Office; Office of Chief Procurement; Privacy, Governmental Liaison and Disclosure; Research, Applied Analytics and Statistics.
She began her career at the IRS in October 2021 as chief data and analytics officer. In this role, in addition to leading the RAAS team, Krause also coordinated research activities including using AI and other advanced analytics. Krause also served as acting deputy commissioner for services and enforcement from November 2022 to March 2023.
Prior to joining the IRS, Krause spent 12 years in the federal oversight community, including the Government Accountability Office and the Department of Veterans Affairs Office of Inspector General. Krause also maintains an active license as a registered nurse. She holds bachelor, master and doctoral degrees from the University of Wisconsin-Madison.
The Pennsylvania Institute of CPAs released a
The report analyzes how accounting firms in Pennsylvania are structuring compensation, navigating retention and recruitment challenges, and adapting their benefits to remain competitive.
Jennifer Cryder
“Our latest findings make it clear: salary alone isn’t enough to attract and retain top talent in today’s market and firms need to be thinking differently about what matters,” said PICPA CEO Jennifer Cryder in a statement. “Holistic compensation strategies that include competitive benefits, flexible work arrangements, and clear career development pathways are critical in today’s world. Above all, we intend for this report to provide firm leaders with the insights they need to build a sustainable workforce for the future.”
The report found the firms surveyed by PICPA are experiencing inconsistencies in their ability to retain talent, with 48.3% reporting an increase in staff retention, while 24.1% of the respondents saw a decrease and 27.6% said retention remained stable. Firms reported an average salary increase of 8% in June 2024, up from 5% in July 2023, indicating slow but consistent average salary growth.
Offering comprehensive benefits remains a priority, with 88.5% of the firms surveyed providing medical insurance, 80.8% offering dental coverage, and 73.1% including vision insurance for employees.
Efforts to attract talent are changing, with 58.7% of the firms that responded to the survey increasing their hiring activity over the past year, while 37.9% maintained steady recruitment levels.
Many firms are responding to employee expectations for work-life balance, with 80% of the surveyed firms allowing flex hours outside of core hours and 76.9% offering flexible work options year-round.
With over half (54.2%) of the surveyed firms identifying hiring and talent retention as a top priority in 2025, the report stresses the need for firms to move beyond traditional compensation models. The report found a shift toward total rewards strategies — integrating salary, benefits, professional development and work-life balance — is essential to attracting and retaining top talent in an increasingly competitive market.
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