BBSI Audit Finds Troubling Problems

A forensic audit by an outside auditor found additional instances of improper financial journal entries by the Barrett Business Services Inc. (Nasdaq: BBSI).

The latest questions about the company’s financial reporting and accounting practices follow BBSI’s disclosures in 2014 that it had under reserved its workers’ comp liabilities by 62%. It had to borrow money to cover the reserves.

Then in early March, BBSI disclosed the unsupported financial journal entries at the same time it replaced Jim Miller as its chief financial officer with the head of its audit committee – Thomas Carley. At the time, BBSI disclosed: “<a href=’’> majority of the unsupported entries overstated direct payroll costs, payroll taxes and benefits expenses, and selling, general and administrative expenses while understating workers’ compensation expense.”

Now in addition to the unsupported financial journal entries, the forensic audit by an unnamed “Big Four” accounting firm also uncovered other problems with BBSI’s books. The company says the investigator also identified certain other journal entries involving trade accounts receivable, marketable securities and payroll tax liability accounts that were not consistent with generally accepted accounting principles (GAAP).

“The Audit Committee believes that these non-GAAP journal entries had no effect on the Company’s consolidated balance sheets and, although certain expenses shifted between periods, the entries did not have a cumulative effect on income from operations, net income, or earnings per share over the periods under investigation,” the company says in a filing with the Securities and Exchange Commission.

The outside auditing firm was initially hired to look at the 2011 through 2015 calendar year financial reports, as well as the first quarter of 2016. The SEC filing discloses that the investigation was expanded to look at journal entries from 2009 and 2010.

BBSI has until May 9 to file its 2015 annual report to retain its listing on Nasdaq and stay in compliance with its lenders. The company says its 2015 annual report filing will also include condensed financial statements for its missing 3Q and 4Q reports from 2015. The filing will include its restated financials for 2013 and 2014 to account for the irregularities. The troubled professional employer organization (PEO) says that the irregularities did not distort its reported earnings.