From: Steven E. Morehart
Sent: April 3, 2006
To: rule-comments@sec.gov
Subject: File No. 265-23


Beard Miller Company LLP (bmc) commends the work of the SEC Advisory Committee on Smaller Public Companies. We fully support the Committee's efforts to ease the regulatory burden on smaller public companies. While the Sarbanes-Oxley Act (the "Act") certainly was well intended, the SEC rules implementing the law do not appear to have provided enough direction and guidance for smaller public companies to comply with certain aspects of the law in a cost effective manner.

For example, in the SEC's proposing rule release (Release No. 33-8138, see http://www.sec.gov/rules/proposed/33-8138.htm ) implementing 404 of the Act, we reflect on the following discussion in the release:

Therefore, for purposes of this release, we need only consider the added incremental burden imposed on companies by the evaluation of that portion of internal controls and procedures for financial reporting that is not subsumed by the disclosure controls and procedures evaluation. In that submission, we estimated that the evaluation of disclosure controls and procedures would add a burden on each issuer of 5 hours per quarterly and annual report. We estimate that the proposed rules would impose an additional 5 burden hours per issuer in connection with each quarterly and annual report. We do not have any data to support this estimate. However, because much of the burden is subsumed in the previous estimate, we believe an estimate of 5 burden hours per quarter is conservative. In addition, in conjunction with annual reports, a company must provide an internal control report. Although the burden of the evaluation has already been considered, the company must compile its conclusions into a publicly disclosed report. We expect that preparation of this report would add an additional 5 hours in conjunction with the annual report.

For PRA [Paperwork Reduction Act] purposes, we do not need to consider the added burden to the company of obtaining an attestation on that internal control report by the company's auditor. The Sarbanes-Oxley Act currently requires companies to obtain such an attestation. Our proposed rules do not establish standards for the contents or format of such attestation. In addition, the proposed rules requiring attestation would not be effective until the PCAOB has had the opportunity to establish such standards. The proposed rules would establish no requirements beyond those required by the Sarbanes-Oxley Act except the requirement that the attestation be filed. We do consider the incremental increase in burden caused by this proposed requirement. We estimate that the costs of filing such an attestation report would be minimal. Similar to our estimates regarding disclosure of readily known information, such as the existence of a code of ethics, we estimate that such filing would create an added burden of 0.5 hours.

From this discussion, it appears the SEC initially estimated that in terms of hours that it would take approximately 25.5 hours per company to comply with management's responsibilities under 404 of the Sarbanes-Oxley Act, which is not feasible given the lack of available guidance. In practice, even the smallest of the companies currently subject to 404 of the Act, have spent multiples of this amount of time in trying to comply with the rules. Additionally, many of those companies have spent hundreds of thousands of dollars and an immeasurable amount of senior management time on this effort with what we understand to be of little benefit in return.

In light of the above, we specifically recommend that the threshold for an exemption from 404 of the Act be raised significantly higher than currently proposed (i.e., the Committee in essence recommends that companies comprising the lowest 1% of total U.S. market capitalization be exempt from 404 of the Act, whereas we recommend that this percentage be increased to up to 6%). We also recommend that this action be taken immediately, including specifically for 2006 for smaller public companies already subject to 404 of the Act and for those companies that have not yet had to comply with the requirements so they can plan accordingly.

Steven E. Morehart | Partner

Beard Miller Company LLP
2609 Keiser Blvd.
P.O. Box 311
Reading, PA 19603-0311