Item 4. Controls and Procedures
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Because of inherent limitations, no evaluation of disclosure controls and procedures can provide absolute assurance that EVgo has detected all control deficiencies. Moreover, the design of disclosure controls and procedures is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
EVgo’s management, including its chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this Quarterly Report, the effectiveness of the Company’s disclosure controls and procedures. Based upon that evaluation, EVgo’s chief executive officer and chief financial officer determined that such controls were not effective as of September 30, 2022 due to material weaknesses in EVgo’s internal control over financial reporting described below.
Changes in Internal Control Over Financial Reporting
Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”) and includes those policies and procedures that:
● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Other than as discussed below under the heading “ Material Weakness Remediation Plan ,” there were no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Material Weakness Remediation Plan
As previously disclosed, EVgo has previously identified several material weaknesses in its internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of EVgo’s financial statements will not be prevented or detected on a timely basis. Specifically, material weaknesses have been previously identified with respect to segregation of duties and review; account reconciliations and preparation of supporting documentation and analysis; effective review of technical accounting matters; review of key inputs for estimates of asset retirement obligations; retail charging revenue recognition; and separate review and approval of journal entries. As of December 31, 2021, EVgo remediated the material weakness related to the review and approval of journal entries.
In order to address the identified material weaknesses, the Company has established a remediation plan which includes the following measures:
● Increasing resources within its organization, including the expansion of its accounting, control and compliance functions to develop and implement continued improvements and enhancements to address the overall deficiencies that led to the material weaknesses;
● Documenting existing, and implementing additional, internal controls over financial reporting;
● Engaging external consultants to assist with documentation of its existing internal controls over financial reporting and identification of control gaps, including the existing material weaknesses, to be remediated;
● Implementing additional training programs for the finance and accounting staff related to the requirements of being a public company and internal controls over financial reporting; and
● Developing a comprehensive plan to address deficiencies in the retail charging revenue cycle.
EVgo is continuing to remediate the remaining material weaknesses as efficiently and effectively as possible, and remediation efforts could continue beyond the fiscal year ending December 31, 2022. At this time, EVgo cannot provide an estimate of costs expected to be incurred in connection with implementing this remediation plan; however, these remediation measures will be time consuming, result in increased costs and place significant demands on the Company’s financial and operational resources.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, EVgo may be a party to legal proceedings or subject to claims arising in the ordinary course of business. EVgo is not currently a party to any material legal proceedings.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.