Chemours management determined internal controls over financials ‘not effective’

In its 10-K filing, the company stated: “Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 using the criteria set forth in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management completed an evaluation of our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of December 31, 2023 due to the material weaknesses described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We did not design and maintain an effective control environment as senior management failed to set an appropriate tone at the top resulting in a material weakness. Specifically, among other things, there was a lack of transparency with the Company’s board of directors by former senior management regarding efforts to delay payments to certain vendors and to accelerate the collection of receivables, and that these individuals engaged in these efforts in part to meet free cash flow targets that the Company had communicated publicly, and which also would be a part of a key metric for determining incentive compensation applicable to both executive officers and to employees. As a result, it was concluded that former senior management violated the Company’s “Code of Ethics applicable to the Chief Executive Officer, the Chief Financial Officer, and the Controller”. The ineffective control environment contributed to the following additional material weaknesses. We did not design and maintain effective controls related to the information and communication component of the COSO Framework, and principles of internally communicating information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control. Specifically, the Company did not design and maintain effective controls to ensure appropriate communication between certain functions within the Company, including (i) the identification and communication of certain contractual arrangements and (ii) communication of business developments which impact key assumptions used in the goodwill impairment assessment. This material weakness related to information and communication contributed to an additional material weakness in that we did not design and maintain effective controls regarding the evaluation and escalation of reports made through the Chemours Ethics Hotline, including controls regarding the escalation of certain reports to the General Counsel and Chair of the Audit Committee. Additionally, we did not design and maintain effective controls to prevent or timely detect unauthorized changes to our ven dor master files in order to prevent unauthorized cash disbursements. These material weaknesses did not result in any material misstatements of the Company’s financial statements or disclosures but did result in immaterial revisions to our March 31, 2023, June 30, 2023 and September 30, 2023 financial statements and a revision to the Company’s Balance Sheet as of December 31, 2022 and the Company’s Statement of Cash Flows for each of the years ended December 31, 2022 and 2021. Additionally, the material weaknesses described above could lead to a misstatement of substantially all account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.”