National Grid 2008 Annual Report Download - page 610

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21665
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 86
Description: EXHIBIT 15.1
0/5282.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/282/5*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21665
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 86 Description: EXHIBIT 15.1
0/5282.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/282/5*
Table of Contents
94
Cor
p
orate Governance continued
National Grid plc
Internal control
In order to understand the risks and potential control issues
facing the Company, the following sections as well as page
16 in the Operating and Financial Review should be
considered. The Board considers that a sound system of
internal control contributes to safeguarding the Company’s
assets and reputation, and, as a result, shareholder
investments. Effective operational and financial controls,
including the maintenance of qualitative financial records,
are an important element of internal control. The Board
further considers that internal controls help manage, but not
eliminate, risk and that these controls can only provide
reasonable, and not absolute, assurance against material
misstatement or loss.
The Board is responsible for the Company’s system of
internal control and monitoring its effectiveness. It has in
place an established system of internal control to be
observed throu
g
hout the Company and its businesses, which
it believes satisfies this responsibility.
The system of internal control depends on thorough and
systematic processes for the identification and assessment
of business-critical risks, including the impact of material
non-compliance with legal, regulatory and internal
governance requirements, and their management and
monitoring over time. This system generates reports from
both line managers and certain independent assurance
providers such as Internal Audit and Risk & Compliance.
The Board’s Committees receive reports on the Company’s
system of internal control as appropriate in relation to their
specific areas of responsibility. The Board’s Committees’
reports to the Board include updates in this regard.
The Board formally reviews the effectiveness of the
Company’s system of internal control on an annual basis to
ensure it remains robust and to identify any control
weaknesses. The latest review covered the financial year to
31 March 2008 and included the period to the approval of
this Annual Report and Accounts.
This review includes:
while the Company reports compliance with the Combined
Code in each Annual Report and Accounts, there is no
requirement to adopt and disclose separate corporate
governance guidelines; and
while the Audit Committee, havin
g
a membership of four
independent Non-executive Directors, exceeds the
minimum membership requirements under Section 303A
of three independent Non-executive Directors, it should be
noted that the quorum for a meeting of the Audit
Committee, of two independent Non-executive Directors,
is less than the minimum membership requirements under
Section 303A.
the receipt of a Letter of Assurance from the Chief
Executive, which consolidates key matters of
interest raised through the year-end assurance process;
assurance from its Committees as appropriate, with
particular reference to the reports received from the Audit
and Risk & Responsibility Committees on the reviews
undertaken by them at their respective Committee
meetings; and
assurances in relation to the Company’s Sarbanes-Oxley
certifications, required as a result of its NYSE listing.
Internal control – information assurance
The Board considers that it is imperative to have accurate
and reliable information within the Company. This is
supported by a risk-based, holistic approach that deals with
information assurance as a business critical function. This
approach ensures accurate and reliable information is
available to those who need it in a timely fashion, thus
enabling informed decisions that support and further
Company objectives.
We manage a broad range of risks in relation to information
assurance. Key elements in managing these risks are
education, training and awareness. These initiatives
emphasise the importance of information security, the quality
of data collection and the affirmation process that supports
our business transactions, evidencing our decisions and
actions. The Company continues to work collaboratively with
a variety of or
g
anisations and professional bodies to develop
and implement best practice.
Internal control over financial reporting – Sarbanes-
Oxley
National Grid has carried out an assessment of its internal
control over financial reportin
g
pursuant to Section 404 of the
Sarbanes-Oxley Act, the requirements of which the
Company is subject to as a result of its listing on the NYSE.
The management of the Company, which is responsible
under the Act for establishing and maintaining an adequate
system of internal control over financial reporting, evaluated
the effectiveness of that system using the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO) framework. Based on that evaluation, the
management of the Company expects to conclude in its
Annual Report on Form 20-F filing with the US Securities
and Exchange Commission that the system of internal
control over financial reporting was effective as at 31
March 2008.
Because KeySpan was acquired by National Grid during the
financial year ended 31 March 2008, it was not required to
be included in management’s assessment of internal control
over financial reporting for the year ended 31 March 2008
and, therefore, management have excluded it from its
assessment. KeySpan is a wholly-owned subsidiary whose
total assets and total revenue represented approximately
25% and 23%, respectively, of the related consolidated
financial statement amounts for the year ended 31
March 2008.
Risk management
Understanding and managing risks is integral to the way we
run our business. We continue to have a well established
enterprise-wide risk management process that ensures risks
are consistently assessed, recorded and reported in a
visible, structured and continuous manner, the outputs of
which are primarily used as a mana
g
ement tool. A
secondary and natural output from this process is
information that provides assurance to management at all
levels and thus helps safeguard our assets and reputation. It
has been designed to manage rather than eliminate material
risks to the achievement of our strategic and business
objectives while also recognising that any such process can
provide only reasonable, and not absolute, assurance
a
g
ainst material misstatement or loss. This process complies
with the Turnbull workin
g
party
g
uidance (revised
October 2005) and, in addition, contributes toward our
compliance with our obligations under the Sarbanes-Oxley
Act as well as other internal assurance activities.