GM: "Our Internal Controls Over Financial Reporting Currently Not Effective"

[Ed is away at the Nissan Juke junket playing [Magic], so I’ll try to keep the ship afloat today]

There are plenty of caveats and warnings in GM’s IPO documents, but one doesn’t need to read all 734 pages to get a bit nervous. On page 25, there’s this:

“We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”

For years, old GM had problems with its accounting controls and reporting (odd for a company run by head bean-counter Rick Wagoner), and in 2009 finally settled a case with the SEC. That supposedly led to a complete overhaul of financial controls and reporting.

Last year’s bankruptcy led to “fresh start accounting”, but the specter of mis-counted beans still haunts New GM:

“Until we have been able to test the operating effectiveness of remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses may materially adversely affect our ability to report accurately our financial condition and results of operations in the future in a timely and reliable manner. In addition, although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.”

One would have hoped that GM’s accounting systems had been dyno-tested before the big IPO, and all that’s riding on it. It’s a bit like the bad old days: new GM products being rushed to market before the bugs are all fleshed out.

Forbes