June
7,
2006
Ms.
Amanda B. Roberts
Staff
Accountant
Securities
and Exchange Commission
Division
of Corporate Finance
Washington,
D.C. 20549
Re: Community
Banks, Inc.
Item
4.01; Form 8-K
Filed
May 26, 2006
File
No. 001-11663
Re:
Correspondence of May 31, 2006
Dear
Ms. Roberts:
Pursuant
to your inquiry of May 31, 2006 regarding our Form 8-K filing of May 26, 2006,
we have prepared the following responses:
| 1. |
You
inquired about the PCAOB registration of Buffamante Whipple Buttafaro,
P.C. (“BWB”) and Custer & Custer P.C. (collectively, the “Predecessor
Auditors”), the auditors that respectively performed the 2004 and 2003
audits of Community’s 401(k) plan. You are correct; the Predecessor
Auditors were not registered with the PCAOB at the time the audits
were
conducted.
|
Community changed its auditors from the Predecessor Auditors to Beard Miller Company LLP (“Beard Miller”), as reported on May 26, 2006 directly in response to a recent notification by BWB that it could no longer perform an audit of the Community Banks, Inc. 401(k) Plan (the “Plan”). BWB had recently become aware of the requirement that
“a
public accounting firm that audits employee stock purchase, savings and similar
plans, interests in which constitute securities registered under the Securities
Act of 1933, must register with the PCAOB”.
Upon
receipt of such notification, and prior to receipt of your letter of May 31,
2006, Community had already taken the following actions:
| a. |
Requested
that Beard Miller, a firm that is registered with the
PCAOB,
perform an audit of both
the 2004 and 2005 Statements of Net Assets Available for Plan Benefits
and
Changes in Net Assets Available for Plan Benefits in connection with
its
annual Form 11-K filing requirements for 2005.
|
| b. |
Prepared
a Form 8-K to formally notify the SEC and any interested stakeholders
of
the engagement of Beard Miller. This change was precipitated by
Community’s need to ensure compliance with the audit requirements of
Section 102 of the Sarbanes-Oxley Act of 2002. Given the pending
reporting
requirements for 2005 and the proximity of the 2005 Form 11-K reporting
deadline (June 29, 2006), Management presumed that the expeditious
re-audit and re-submission of 2004 information and initial submission
of
audited 2005
|
information should be the immediate priority. Beard Miller is currently
performing audit procedures and plans to issue its audit report as a
PCAOB- registered firm at or near June 29,
2006 for both
2004
and 2005.
| c. |
Management
had originally intended to contact the SEC with respect to its
responsibility for 2003 information after the completion of the 2004
and
2005 audit by Beard Miller. Management intended to acknowledge that
the
Predecessor Auditors were not
registered with the PCAOB.
|
| d. |
Management
now understands its reporting requirements with respect to audits
by
PCAOB-registered firms beginning October 22, 2003. However, it should
be
noted that audits were
performed, albeit by non-registered firms. While Form 11-K filings
were
not in technical compliance, the previously-issued Forms 11-K did
include
representations by the predecessor auditors regarding the fair
presentation of this information.
|
To
date, management has not issued amended Forms 11-K for 2003 or 2004. In a
separate communication to the Division of Corporate Finance, we are requesting
a
waiver of the “re-audit” requirement for 2003 and an extension of the filing of
an amended Form 11-K for 2004 until the 2004 audit is completed.
| 2. |
We
confirm that our new Plan auditor, Beard Miller Company LLP, is also
known
as “bmc LLP,” and was referred to as such in our 8-K filing for the
auditor change. Beard Miller Company LLP is registered with the
PCAOB.
|
In
connection with responding to the Commission’s comment letter dated May 31,
2006, Community hereby acknowledges that:
| · |
Community
is responsible for the adequacy and accuracy of the disclosure in
its
filings;
|
| · |
Staff
comments or changes to disclosure in response to staff comments do
not
foreclose the Commission from taking any action with respect to the
filing; and
|
| · |
Community
may not assert staff comments as a defense in any proceeding initiated
by
the Commission or any person under the federal securities laws of
the
United States.
|
Please
feel free to contact me directly at 717-920-5801 (email: dholt@communitybanks.com).
You
may also feel free to contact my colleague, Gary Manley (717-920-5803; email
gmanley@communitybanks.com)
if I
should be unavailable.
Sincerely,
COMMUNITY
BANKS, INC.
/s/
Donald F. Holt
Donald
F. Holt
Executive
Vice-President and CFO