FairPoint Communications 2007 Annual Report Download - page 110

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Table of Contents


Not applicable.
 

An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in
Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report was made under the supervision and
with the participation of our management, including our chief executive officer and chief financial officer. Based upon this evaluation, our
chief executive officer and chief financial officer have each concluded that our disclosure controls and procedures were not effective as of
December 31, 2007 because we identified a material weakness in our internal control over financial reporting as described below.
The material weakness is related to our northern New England division which was formed in 2007 to handle transactions relating to
the merger. This division is in the development stage at this time, with evolving processes and controls, relatively small staff sizes and
entirely new personnel.
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and for
evaluating the effectiveness of internal control over financial reporting as of December 31, 2007. Internal control over financial reporting is
a process designed by, or under the supervision of, our principal executive officer and principle financial officer, and effected by our
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 United States Generally Accepted Accounting Principles
(“US GAAP”). Our system of internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US
GAAP, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets
that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
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.
Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2007 based upon
criteria in issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on such evaluation, management determined that our internal control over financial reporting was not effective as of
December 31, 2007 because the following material weakness in internal control over financial reporting existed as of December 31, 2007:
• Our management oversight and review procedures designed to monitor the effectiveness of control activities in the northern New
England division were ineffective. As a result, errors existed in capitalized software costs, operating expenses, accounts
receivable, prepaid expenses, accounts payable and accrued expenses in our preliminary 2007 consolidated financial statements.
These identified errors were corrected prior to the finalization of those financial statements.
The effectiveness of internal control over financial reporting as of December 31, 2007 has been audited by KPMG LLP, an
independent registered public accounting firm.
108