WILMINGTON, Del. - The Chemours Company (NYSE: NYSE:CC), a global chemical corporation, has recently concluded an internal review led by its Audit Committee, which was initiated following an anonymous report via the company's Ethics Hotline.
The review, which was substantially completed and reported to the full Board on March 5, 2024, found that certain senior management members violated the company’s Code of Ethics. These individuals, who have since been placed on administrative leave, were found to have manipulated the timing of payables and receivables to meet free cash flow targets and potentially influence incentive compensation.
The Audit Committee's investigation, with the aid of independent outside counsel, revealed that in the fourth quarter of 2023, there were deliberate efforts by these senior managers to defer payments to vendors and accelerate receivable collections. This was done to enhance the company's free cash flow figures for the end of that period. It was also discovered that similar, albeit smaller, actions were taken in the fourth quarter of 2022.
Despite these findings, the preliminary unaudited estimates of operating results and other financial measures for the year ended December 31, 2023, as previously disclosed on February 29, 2024, remain unaffected. However, the company is assessing the overall impact on cash flow measures and expects a significant decrease in these measures for the first quarter of 2024 due to the timing manipulation.
The internal review also uncovered inadequate controls and procedures in the handling of Ethics Hotline reports, which led to the failure to elevate the anonymous report to the General Counsel or Audit Committee in a timely manner. As a result, Chemours is considering the identification of potential material weaknesses in its internal control over financial reporting as of December 31, 2023. The company is actively working to complete its year-end reporting process and plans to file its Annual Report on Form 10-K promptly.
This review and the subsequent findings underscore issues with the company's control environment and the communication components of the COSO internal control framework, particularly concerning the Ethics Hotline program. Chemours expects to report on these material weaknesses and its remediation plans in its upcoming Annual Report on Form 10-K.
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