BT 2000 Annual Report Download - page 47

Corporate Governance
46 Annual report and Form 20-F
Director and Chief Technology O¤cer, the Managing
Director, BT Cellnet and UK Mobility, the President BT
Europe, the Managing Director Network and Information
Services and the Director, Brand and Reputation. The
Committee develops the group's strategy, for Board
approval, and oversees its implementation. It also ¢nalises,
before Board approval, annual operating and capital
expenditure plans and budgets, reviews operational
activities and agrees and monitors group-wide policies,
where these are not reserved to the Board.
The Nominating Committee, consisting of the
Chairman, Deputy Chairman and three other non-executive
directors, ensures the Board has an appropriate balance of
expertise and ability. For this purpose, it has agreed, and
regularly reviews, a pro¢le of the required skills and
attributes. This pro¢le is used to assess the suitability as
non-executive directors of candidates put forward by the
directors and outside consultants. Candidates short-listed
for appointment are met by the Committee before it
recommends an appointment to the Board.
The Nominating Committee also assesses candidates
for executive directorships before it recommends
an appointment.
The Audit Committee, comprising solely non-executive
directors, is chaired by Lord Marshall. Its terms of
reference, include reviewing BT's internal controls and
published ¢nancial reports for statutory compliance and
against standards of best practice, and recommending to
the Board appropriate disclosure in these reports. It also
reviews annually the performance of the company's
auditors to ensure that an objective, professional and cost-
e¡ective relationship is maintained. It recommends to the
Board the auditors' fees for their audit services. The Group
Finance Director and the Group Commercial Director and
Secretary attend Audit Committee meetings. Each year, the
Committee sets aside time to seek the views of the
company's auditors in the absence of executives.
The Remuneration Committee comprises solely non-
executive directors and is chaired by Lord Marshall.
Further details about the Committee are included in the
Report on directors' remuneration.
Committee membership is identi¢ed in the table of
directors on pages 42 and 43.
Internal control and risk management
The Board is responsible for the group's systems of
internal control and risk management and for reviewing
the e¡ectiveness of those systems. Such systems are
designed to manage, rather than eliminate, the risk of
failure to achieve business objectives; any system can
provide only reasonable and not absolute assurance against
material misstatement or loss.
The Code introduced a requirement that the Board's
review of internal controls extend to all controls, including
¢nancial and operational controls, compliance and risk
management. Guidance for directors on this requirement
was published in September 1999. The Board con¢rms that
the procedures necessary to implement this guidance were
established by 31 March 2000. The Board intends to report
on its review of the whole system of internal control in
next year's annual report.
For the 2000 ¢nancial year, the Audit Committee
has continued to review internal ¢nancial controls in
accordance with the London Stock Exchange's
transitional rules.
Key elements of the group's systems of internal
¢nancial control are:
&Formal policies and procedures are in place, including
the documentation of key systems and rules relating
to the delegation of authorities, which allow the
monitoring of controls and restrict the unauthorised
use of the group's assets.
&Experienced and suitably quali¢ed sta¡ take
responsibility for important business functions. There
are rigorous recruitment policies and annual appraisal
procedures which assess performance against agreed
objectives and identify necessary training to maintain
and enhance standards of performance.
&Forecasts and budgets are prepared which allow
management to monitor the key business and ¢nancial
activities and risks and the progress towards ¢nancial
objectives set for the year and the medium term;
monthly management accounts are prepared promptly
providing relevant, reliable and up-to-date ¢nancial
and other information; signi¢cant variances from
budget are investigated as appropriate.
&All investment projects are subject to formal
authorisation procedures. The Board considers major
investment projects, with other projects being
approved by the Group Investment Committee (a sub-
committee of the Group Executive Committee) or senior
management within delegated authorities approved
and reviewed by the Board.
&The Audit Committee reviews reports from
management, from the internal auditors and from the
external auditors, to provide reasonable assurance that
control procedures are in place and are being followed.
&Formal procedures have been established for
instituting appropriate action to correct weaknesses
identi¢ed from the above reports.