Mayor Nancy Carroll and Councilman Lloyd White both emphasized the Internal Control Reports lack of importance – to them.
Audited Financial Statements include an Internal Controls’ Report. It’s not a casual ‘letter’, it’s a requirement of the Securities and Exchange Commission. Beaumont’s 2017 Audited Financial Statements that were six months overdue did not include an Internal Controls Report.
Internal Controls are designed to prevent Fraud. Beaumont has no Internal Controls because it operates fraudulently.
At the June 5, 2018, Beaumont City Council Meeting Vanessa Burke, Auditor for the Pun Group stated that the Internal Control’s Report would be presented at the June 19, 2018, City Council Meeting.
At the June 19, 2018, Beaumont City Council Meeting Finance Director Melana Taylor told the Council that the Internal Control’s ‘letter’ would not be released until July.
Mayor Nancy Carroll and Councilman Lloyd White both emphasized the Internal Control Reports lack of importance. Ken Pun affirmed White’s statement that the Internal Controls Report is not part of the Audit, but SEC Laws specify that the ‘Report’ is part of the Audit and not separate. And not a ‘letter’.
June 5, 2018 Beaumont City Council Transcript:
3:01:00 Burke: We have to assess your audit risk and determine of you have sufficient levels of controls over those risks. When we audit and if we were to identify significant deficiencies and material weaknesses in your internal controls structure we would be required to report those to you. We plan to have our Report on Internal Control’s Deficiencies, Material Weaknesses at that June 19th Meeting
Beaumont City Council Meeting Transcript June 19, 2018: https://www.youtube.com/watch?v=jbAe1PpdQOU
4:16:00 Finance Director Melania Taylor: The Audit you have in final draft form is very close to the Audit you’ve seen previously. The Internal Control Letter is not available yet. We should have that shortly, but it was not available tonight.
4:17:00 Mayor Nancy Carroll: The Internal Control Letter. That we do not have to ask questions on tonight, but we will have that when?
Taylor: In July.
Martinez: This is just Receive and File?
Taylor: Acceptance, yes.
White: The Internal Controls Letter is a separate document, right? It’s not part of the Audit.
4:18:00 Ken Pun: That’s Correct.
SEC. 404. MANAGEMENT ASSESSMENT OF INTERNAL CONTROLS.
(a) RULES REQUIRED.—The Commission shall prescribe rules requiring each annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal control report, which shall—
(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
(2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
(b) INTERNAL CONTROL EVALUATION AND REPORTING.—With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement.
SEC. 303. IMPROPER INFLUENCE ON CONDUCT OF AUDITS.
(a) RULES TO PROHIBIT.—It shall be unlawful, in contravention of such rules or regulations as the Commission shall prescribe as necessary and appropriate in the public interest or for the protection of investors, for any officer or director of an issuer, or any other person acting under the direction thereof, to take any action to fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant engaged in the performance of an audit of the financial statements of that issuer for the purpose of rendering such financial statements materially misleading.