The Top Ten Largest Excel Errors in History
Excel errors happen everyday. In fact, according to research, at least 88 percent of spreadsheets have errors in them. Raymond Panko summed this up quite effectively saying, “The issue is how many errors there are, not whether an error exists”. So why are so many organizations still relying heavily on Excel without protection? And how do the top executives at these very firms sleep at night? With emerging software platforms offering data validation and safety from large Excel errors, why are we all not rushing out to fix this huge industry flaw immediately?
Well, one thing is definite, we should be.
History tends to repeat itself, so I thought I would remind us all how dangerous Excel can be when not properly utilized.
Here are the top ten largest Excel errors in history:
- London Whale
- In 2012 Trader Bruno Iksil, nicknamed London Whale, lost $6.2 billion for JPMorgan Chase. An internal report stated that the company was using Excel to monitor their risk limits, which involved manual copying and pasting from one spreadsheet to another. In this process a measure was added instead of averaged. This led JPMorgan to perceive the risk as half as risky as it was!
- Carmen Reinhart and Kenneth Rogoff
- In 2010 Harvard professors Carmen Reinhart and Kenneth Rogoff released a paper “Growth in a Time of Debt” that declared that when a country’s debt hit 90% of it’s GDP, the economy slows dramatically, when in fact it increases. This paper was relied on by several politicians including the House Budget Chairman and former Treasury Secretary! Reinhart and Rogoff came to this conclusion by analyzing the debt levels of dozens of countries all the way back to the 1800s. They concluded saying that countries in the 90% plus category saw their economies shrink -0.1% a year. Fortunately, three economists from UMASS Amherst discovered that an Excel error existed in their spreadsheets which omitted the first five countries in their data! With the correct data, the professors calculated that the countries running debt levels above 90% actually saw their economies grow 2.2%!
- MF Global
- In 2011, MF Global reported that an “operational error” hid the transfers of $600 Million two days before declaring bankruptcy. Apparently, the year prior, MF Global’s consultants had advised them to improve their risk monitoring technology, including Excel. MF Global did not listen however, and the reckless technology processes ultimately led them to ruin. According to Louis Freeh, MF Global bankruptcy trustee, their accounting systems were so inefficient that the executives probably had no idea that they had illegally tapped customer accounts to fund the company’s prop trade and more importantly, they probably had no idea how close they were to running out of money.
- In 2008, Barclays delivered their offer to purchase collapsing Lehman Brothers in Excel, however the spreadsheet actually hid 179 of Lehman’s harmful deals. When the law associate converted the Excel file to PDF and e-mailed it to the bankruptcy court, the concealed portions of the document appeared forcing Barclays to purchase the additional deals that they never intended to buy.
- Fannie Mae
- In 2003, Fannie Mae, the Federal National Mortgage Association, released a statement that their third-quarter financials had a $1.136 Billion error in total shareholder equity. They explained that there were “honest mistakes made in a spreadsheet”. This error cost the company over $1 Billion, resulting in the share prices falling from $73.10 to $2.25.
- Fidelity Magellan Fund
- In 1995, Fidelity Magellan Fund made a critical Excel error by omitting a minus sign on a net capital loss of $1.3 Billion, resulting in the dividend estimate spreadsheet to be off by $2.6 billion. The error robbed Magellan holders of what Fidelity had originally promised as a year-end distribution of $4.32 a share.
- Utah State Office of Education
- In 2012, the Utah State Office of Education had a $25 Million budget deficit due to defective data entry in an Excel spreadsheet. The error understated the number of students who would enroll by 8,000. Two of the top finance officials submitted their resignations as a result.
- West Coast Rail Line
- In 2013, tax payers suffered a cost of over $76.6 Million due to an assessment error in Excel. British government inadequately assed the bid for the West Coast Main Line.
- In 2003 TransAlta, the electricity power generator, lost $24 Million from a copying and pasting error in Excel. As a result, TransAlta purchased more US power transmission hedging contracts then desired, and at an escalated price. The error was not spotted in their final review prior to the offer and New York ISO rules prohibited reversal of bids, proceeding with the contracts.
- University of Toledo
- In 2014 the University of Toledo lost $2.4 Million in projected revenue due to a budgeting error in Excel. The typo portrayed an increase in graduate student enrollments, when in actuality there was a 10 percent decline. The enrollment overstatement led to the overestimated projected revenue.
Stay tuned for our next blog with tips on how to protect your organization from simple Excel blunders.