REPORT OF THE BOARD
Year ended 31 December 2009
The Board presents its report together with the audited financial statements for the year ended 31 December 2009.
Principal Activities
The principal activities of Bord Gáis Éireann are the transportation of natural gas, the generation of renewable energy and the sale of natural gas and electricity to residential and business customers. Construction of a gas fired power station at Whitegate, Co. Cork is at an advanced stage.
Results and Business Review
The financial results show a profit on ordinary activities before taxation for the financial year of €118.9 million compared to €150.6 million for 2008. Details of the results for the year are set out in the Consolidated Profit and Loss Account on Page 68 and in the related notes.
Further commentary on performance during the year ended 31 December 2009, including the financial position, information on recent events, and likely future developments, are contained in the Chairman’s Statement, the Chief Executive’s Review and the Financial Review.
The acquisition of SWS Natural Resources on 4 December 2009 represented a significant increase in the scope of operations. Arrangements are underway to integrate the processes and procedures of Bord Gáis Éireann into this subsidiary.
There have been no significant events affecting Bord Gáis Éireann since the year end.
Corporate Governance
In June 2009, the Department of Finance issued a revised Code of Practice for the Governance of State Bodies with which Bord Gáis Éireann is required to comply.
Well established processes are embedded within the organisation to comply with the existing key provisions which include:
| • | A requirement for written Codes of Conduct for directors and employees. |
| • | A written constitution and responsibilities of the Internal Audit function. |
| • | Compliance with national and EU tendering and procurement procedures. |
| • | Procedures in respect of the disposal of assets or access to assets by third parties for commercial arrangements. |
| • | Prior written approval of the Minister for Communications, Energy and Natural Resources (the “Minister”) for any intended action, which would extend or change significantly the nature, scope or scale of current business activities. |
| • | Prior written approval of the Minister and the Minister for Finance for establishment or acquisition of subsidiaries, participation in joint ventures and the acquisition of shares. |
| • | Adherence to the guidelines for the appraisal and management of capital expenditure proposals as issued by the Department of Finance in January 2005. |
| • | Implementation of Government policy on the remuneration of the Chief Executive. |
| • | Delivery of interim half year unaudited accounts to the Department of Communications, Energy and Natural Resources (the “Department”) within two months of half-year end. The Annual Report and Accounts should be published not later than four months after the year-end. Also, the Chairman must furnish separately to the Minister, with the Annual Report and Accounts, a comprehensive report covering the company’s business activities. |
| • | Chairpersons of each subsidiary formally report to the main Board on compliance with the Code of Practice in a similar manner as the Chairman of the main Board reports to the Minister. |
| • | Production of Strategic and Corporate Plans in the first six months of the year, approved by the Board and sent to the Minister and Minister for Finance. |
| • | Annual submission to the Department of a statement confirming compliance with taxation laws and confirming that all tax liabilities are paid on or before the due date. |
Arrangements have been put in place to comply with the new requirements of the revised Code of Practice.
These new requirements include:
| • | A formal annual performance evaluation of the Board, as well as a requirement for the Board to constantly review its own performance and that of its committees and individual directors. |
| • | Adoption of a statement of strategy for a period of three to five years ahead. |
| • | Linking major items of expenditure to medium to long term strategies. |
| • | The development of a Risk Management Policy, the effectiveness of which should be monitored by the Board. |
| • | Consideration should be given to the establishment of a Risk Committee. |
| • | Where a Board Chair is of the view that specific skills are required on the Board, he/she should advise the relevant Minister of this view in order that the Minister may take the Chair’s views into consideration when making appointments. |
| • | Revised thresholds in respect of the disposal of assets or access to assets by third parties for commercial arrangements. |
| • | Publication in the Annual Report of fees paid to each director, the expenses paid to the Board, broken down by category, and the salary of the Chief Executive Officer. |
| • | Adoption of a policy on foreign travel. |
| • | Adoption of a policy for confidential disclosures regarding possible irregularities in financial reporting. |
| • | Guidelines regarding disputes with other State Bodies. |
The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit, and relations with shareholders.
The Combined Code contains broad principles and more specific provisions. As part of the Listing Rules, companies listed on the Irish Stock Exchange are required to report on how they have applied the principles of the Combined Code, and either to confirm that they have complied with the provisions of the Combined Code or, where they have not, to provide an explanation.
The Financial Reporting Council (FRC) began a review of the effectiveness of the Combined Code in March 2009 and published its findings in December 2009. It found that while the Combined Code and its related guidance require some updating, it remains broadly fit for purpose. The main changes, which are proposed to apply to accounting periods beginning on or after 29 June 2010, include new Code principles on: the roles of the Chairman and non-executive directors; the need for the board to have an appropriate mix of skills, experience and independence; the commitment levels expected of directors; and the board’s responsibility for defining the company’s risk appetite and tolerance.
The proposed new Code also includes the following new provisions: board evaluation reviews to be externally facilitated at least every three years; and the Chairman to hold regular development reviews with all directors.
Bord Gáis Éireann is a body corporate established under the Gas Act, 1976, and, as a result, is not required to adhere to the Combined Code. However, the Board is committed to achieving the highest standards of corporate governance and ethical business conduct and the principles of Section 1 of the Combined Code are applied with the following exceptions:
Board Balance and Independence: The composition of the Board is a matter for the Minister and the Board currently has one executive Member as outlined below.
Appointments to the Board and Re-election: The appointment and re-appointment of Board Members is a matter for the Minister.
Level and Make-up of Remuneration: The Remuneration Committee, chaired by the Chairman, considers and makes recommendations to the Board solely on the remuneration of the Chief Executive. The remuneration of non-executive Board Members is a matter for the Minister.
Constructive use of the AGM: An Annual General Meeting cannot be held as it is not provided for under the Gas Acts 1976 to 2002. A meeting of Capital Stockholders is held in accordance with the Capital Stock Scheme implemented as part of the Bord Gáis Employee Share Ownership Plan.
Bord Gáis Éireann complies with the provisions of Section 1 of the Combined Code with the following exception:
The Board has agreed that the appointment of a Senior Independent Director would not be appropriate in the context of Bord Gáis Éireann as a semi-state organisation.
Bord Gáis Éireann also complies with the corporate governance and other obligations imposed by the Ethics in Public Office Act, 1995 and the Standards in Public Office Act, 2001.
Board Membership
The names of the Board Members and a short biographical note on each Member are as set out on page 10.
At 31 December 2009, the Board comprised of the Chief Executive and eight independent non-executive Board Members (including the Chairman) who are appointed by the Minister. The only executive Board Member is the Chief Executive.
Board Members are generally appointed for five year terms and the terms and conditions of appointments and details of Board Members’ fees are set out in writing.
The Roles of the Chairman and the Chief Executive
The roles of the Chairman and Chief Executive are separate and there is clear division of responsibilities between them.
The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda. The Chairman facilitates the effective contribution of all Board Members and constructive relations between the Chief Executive and the other Board Members and ensures that Board Members receive relevant, accurate and timely information.
The Chief Executive has direct charge of Bord Gáis Éireann on a day to day basis and is accountable to the Board for financial and operational performance.
The Board has delegated the following responsibilities to the Chief Executive:
| • | the development and recommendation of strategic plans for consideration by the Board that reflect the longer-term objectives and priorities established by the Board; |
| • | implementation of the strategies and policies of the organisation as determined by the Board; |
| • | monitoring of the operating and financial results against plans and budgets; |
| • | prioritising the allocation of technical and human resources; |
| • | implementing risk management systems. |
The Chief Executive is accountable to the Board for all authority delegated to executive management.
The Board
While day to day responsibility for leadership and control is delegated, within defined authority limits, to the Chief Executive and his Management Team, the Board is ultimately accountable for the performance of Bord Gáis Éireann.
The following matters are reserved for Board approval:
| • | Corporate Plan |
| • | Annual Report and Financial Statements |
| • | Treasury Policy |
| • | Risk Management Policy |
| • | Energy Trading Risk Management Policy |
| • | General Tendering and Purchasing Procedures |
| • | Review of Effectiveness of System of Internal Control |
| • | Annual Budget |
| • | Expenditure Authorisation Levels Including Terms of Major Contracts |
| • | Code of Conduct |
| • | Disaster Contingency Plans |
| • | Policy on Determination of Senior Management Remuneration |
| • | Appointment, Remuneration and Assessment of Performance of the Chief Executive |
| • | Significant Amendments to Pension Benefits of the Chief Executive and Staff (which may require Ministerial approval). |
The Board Members, in the furtherance of their duties, can at the expense of Bord Gáis Éireann, take independent professional advice. All Board Members have access to the advice and services of the Secretary who is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with. Insurance cover is in place to protect Board Members and Officers against liability arising from legal actions taken against them in the course of their duties.
The Board recognises the need to ensure that Board Members are aware of their legal and fiduciary responsibilities and that they are kept up to date and fully informed of industry, economic and corporate governance developments and changes in best practice.
An induction process is in place for new Board Members and a comprehensive set of briefing papers is issued to all Board Members on their appointment.
Board papers, which include monthly Management Accounts, are sent to Board Members in the week prior to Board Meetings.
Briefings by specialist external speakers are provided at Board meetings on a regular basis.
Board Members’ Remuneration
The Minister determines the fees payable to Board Members. Board Members fees and expenses during 2009 are set out below.
| Board Member | Fees € |
Date of Appointment/Retirement |
| Rose Hynes (Chairman) | 22,978 | Appointed as Chairman 28th July 2009 |
| Ed O’Connell (former Chairman) | 16,333 | Retired 30th June 2009 |
| John Mullins (Chief Executive) | 16,188 | |
| Laurence Crowley | 6,563 | Appointed 1st August 2009 |
| Aidan Eames | 11,753 | Warrant of appointment renewed 10th June 2009 |
| Proinsias Kitt | 17,388 | Acting Chairman for period 30th June 2009 to 28th July 2009 |
| Joe O’Flynn | 16,188 | |
| Mike O’Hara | 16,188 | |
| Pearse O’Hanrahan | 16,188 | |
| Laurence K. Shields | 8,770 | Appointed 10th June 2009 |
| Expenses Paid to Board | € |
| Mileage | 12,320 |
| Other Travel | 650 |
| Subsistence | 1,325 |
| Telephone | 994 |
The remuneration of the Chief Executive is in line with “Guidelines on Contracts, Remuneration and other Conditions of Chief Executives and Senior Management of Commercial State Bodies” issued in March 2006 and is summarised in note 2 to the Financial Statements.
Board Members’ Independence
Non-executive Board Members are independent of management and are required to declare any interests or relationship which could interfere with the exercise of their independent judgement.
Board Evaluation
The Board has completed annual formal evaluations of its own performance, that of individual Board Members and of its Committees. The process by which the Board and Committee evaluation was undertaken involved the completion by the Board Members of a detailed questionnaire and preparation of a report back to the Board. In the case of individual Board Member performance this was carried out by means of a one to one session with the Chairman.
The non-executive Board Members meet annually to carry out a performance evaluation of the Chairman taking into account the views of the Chief Executive.
Attendance at Meetings
| Board Member | Attendance at Scheduled Meetings | Attendance at Special Meetings* |
| Rose Hynes (Chairman) | (10/10) | (4/4) |
| Ed O’Connell (former Chairman) | (6/6)(p) | (1/1)(p) |
| John Mullins (Chief Executive) | (10/10) | (4/4) |
| Laurence Crowley | (3/3)(p) | (2/3)(p) |
| Aidan Eames | (7/7)(p) | (3/4) |
| Proinsias Kitt | (8/10) | (4/4) |
| Joe O’Flynn | (9/10) | (1/4) |
| Mike O’Hara | (8/10) | (4/4) |
| Pearse O’Hanrahan | (9/10) | (4/4) |
| Laurence K. Shields | (5/5)(p) | (3/3)(p) |
(p) refers to the number of meetings it was possible to attend relative to the dates of appointment/retirement.
* Special Board Meetings are additional to Scheduled Board Meetings.
Board Committees in 2009
The Board has an effective committee structure to assist in the discharge of its responsibilities. At 31 December 2009, the Board had four committees, each of which has formal terms of reference. During the year the Audit Committee and Finance Committee were amalgamated to form an Audit and Finance Committee and a separate Risk Committee was also established.
The following table outlines membership of the committees and attendance at meetings during 2009:
| Audit | Finance | Audit and Finance |
| P. Kitt (Chairman) (3/3) | P. Kitt (Chairman) (3/4) | P. Kitt (Chairman) (1/1) |
| L. Crowley (1/1)(p) | A. Eames (1/1)(p) | L. Crowley (1/1) |
| A. Eames (2/2)(p) | R. Hynes (4/4) | A. Eames (1/1) |
| R. Hynes (2/2)(p) | P. O’Hanrahan (4/4) | J. O’Flynn (1/1) |
| P. O’Hanrahan (3/3) | J. O’Flynn (3/4) | |
| J. O’Flynn (3/3) | ||
| Risk | Investment / Infrastructure | Remuneration |
| A. Eames (Chairman) (2/2) | P. O’Hanrahan (Chairman) (9/9) | R. Hynes (Chairman) (0/0)(p) |
| L. Crowley (2/2) | R. Hynes (9/9) | E. O’Connell (former Chairman) (2/2) |
| P. Kitt (2/2) | J. Mullins (9/9) | A. Eames (2/2) |
| P. O’Hanrahan (2/2) | J. O’Flynn (5/9) | M. O’Hara (2/2) |
| L.K. Shields (2/2)(p) | L.K. Shields (0/0)(p) |
(p) refers to the number of meetings it was possible to attend relative to the dates of committee membership.
Audit and Finance Committee
The main function of the Audit and Finance Committee is to assist the Board in fulfilling its responsibilities in ensuring the appropriateness and completeness of the system of internal control, reviewing the manner and framework in which management ensures and monitors the adequacy of the nature, extent and effectiveness of internal control systems, including accounting control systems and thereby maintaining an effective system of internal control. The Committee carries out this responsibility in close liaison with the Board Risk Committee, which advises the Board in establishing the Board’s risk appetite and setting standards for the Board’s risk control framework.
The internal and external auditors meet with the Audit and Finance Committee as provided for in the Committee’s Terms of Reference and the Internal Audit Charter. The Audit and Finance Committee meets quarterly with the internal audit function and periodically with the external auditor to discuss control issues, financial reporting and other related matters. The Chairman of the Audit and Finance Committee reports to the Board on all significant issues considered by the Committee.
During 2009 the Audit and Finance Committee reviewed the annual financial statements, the system of internal controls, the reports of the Internal and External Auditors and Risk Management, monitored the effectiveness of internal audit and considered and made recommendations to the Board on the annual operating plan and budget. During 2009 the amalgamation of the Risk Management and Internal Audit functions was completed under a new Head of Internal Audit and Risk with the operational resource requirements for Internal Audit provided by an outsourced service provider selected by means of a competitive tender process.
The Audit and Finance Committee Terms of Reference include the consideration and recommendation on the appointment of the External Auditor. The Committee has approved a policy on the engagement of the External Auditor for non-audit work which ensures that independence and objectivity is safeguarded in accordance with best practice. The Internal and External Auditors have full and unrestricted access to the Audit and Finance Committee. The Head of Internal Audit and Risk reports functionally to the Audit and Finance Committee, administratively to the Finance Director and also has a direct line of communication with the Chief Executive. The Terms of Reference were updated during 2009 to reflect the amalgamation of the Audit Committee with the Finance Committee and also to reflect the transfer of certain risk management functions to the Risk Committee. The Board is satisfied that at all times during the year at least one Member of the Committee had recent and relevant financial experience.
A Raising Concerns Policy is included in the Code of Business Conduct. Review of this policy is included in the Terms of Reference of the Audit and Finance Committee.
Risk Committee
The role of the Risk Committee is to assist the Board in the effective discharge of its responsibilities for business, strategic, operational, trading, treasury, contract, reputational, information security, technical, legal and regulatory risk management. This includes approving and monitoring the organisation’s risk management strategy, control processes and reporting systems. The establishment of this Committee is aligned with the new requirements of the Code of Practice for the Governance of State Bodies. The Head of Internal Audit and Risk reports directly to the Risk Committee in relation to risk management.
Investment and Infrastructure Committee
The Investment and Infrastructure Committee meets regularly to evaluate new development opportunities and monitors projects involving significant capital expenditure and reports to the Board on a regular basis to ensure that new developments, opportunities and projects meet appropriate criteria including, amongst other considerations, shareholder return expectations.
Remuneration Committee
The Remuneration Committee considers and makes recommendations to the Board on the remuneration and other terms and conditions of employment of the Chief Executive. The Committee monitors the development of current and future management of Bord Gáis Éireann. During 2009 the Committee considered the 2008 outturn and 2009 targets for performance related pay which is linked to the Balanced Scorecard process.
Communication with the Principal Shareholder
Through regular contact with the Department of Communications, Energy and Natural Resources, the Board and management maintain an ongoing dialogue with the principal shareholder on strategic issues to ensure that Board Members are aware of and kept up to date on the views of the shareholder.
Principal Risks and Uncertainties
Bord Gáis Éireann has a well established enterprise wide risk management process that ensures risks are consistently identified, assessed, recorded and reported across all Business Units and functions. Risk Registers are maintained and updated quarterly. The process is based on both bottom-up and top-down assessments of operational, financial, and other business and project risks. This risk process has identified the following key risks and uncertainties that may affect the future development of Bord Gáis Éireann:
Safety: A major safety incident could result in injury, loss of life or a security of supply issue. Attention to safety and promoting best practice in the safe and responsible use of natural gas is a key priority for Bord Gáis Éireann. Bord Gáis Éireann operates a comprehensive safety programme in dealing with staff, contractors and the public.
Regulation: Bord Gáis Éireann’s business activities are subject to a broad range of legislative provisions and regulation. The scope of activities subject to regulation makes this a significant risk issue for Bord Gáis Éireann as changes in the evolving regulatory climate and framework in which Bord Gáis Éireann operates may impact unfavourably. Directive 2009/73/EC of the European Parliament and of the Council (The Third Directive) concerning common rules for the internal market in natural gas came into effect on 3 September 2009 repealing the existing Second Gas Directive. The issues addressed by the Third Directive include further unbundling of gas transmission from gas supply. A reorganisation of Bord Gáis Éireann consequent upon the implementation of the Third Directive could have a material effect on BGE’s business, results of operations and/or financial condition. The other main regulatory risks faced by Bord Gáis Éireann include licence compliance, the impact of price control reviews, and other changes to market mechanisms such as the Single Electricity Market (SEM) and the planned Common Arrangement for Gas (CAG). Regulatory risks are managed by senior management within the relevant Business Units through comprehensive licence compliance programmes and through a pro-active approach to engaging with the Regulatory Authorities on regulatory developments. These activities are overseen by regulatory and risk functions at corporate level to ensure continued compliance with all regulatory requirements.
Financing: Recent financial market turmoil has increased Bord Gáis Éireann’s exposure to interest rate, currency, liquidity and counterparty risks. These risks are managed centrally by the Treasury function, within parameters set out in the Treasury Policy. Further information is contained in the Financial Review.
Trading Risk: Bord Gáis Éireann is subject to trading risks associated with the purchase and sale of gas and electricity, Bord Gáis Éireann’s gas and electricity trading activities are managed in accordance with Board approved policies which incorporate best practice principles for managing risks. The Energy Trading Risk Management Policy is described in more detail in the Financial Review.
Business Development Activity: Business development activities, including acquisitions such as the acquisition of SWS Natural Resources, and investments in new businesses and new energy assets, may not deliver the planned growth or rate of return due to unanticipated events. Detailed plans and mitigating actions are in place to ensure such risks are minimised. Further details concerning the acquisition of SWS Natural Resources and other transactions undertaken during 2009, are contained in the Chief Executive’s Review.
Project Delivery and Asset Performance: Project delivery in general is subject to technical, commercial, contractor, planning permission, relevant approvals and economic risks. Failure to secure grid connections is an additional key risk on electricity development projects. Following the successful acquisition of SWS Natural Resources, Bord Gáis Éireann is exposed to build out risk for wind farms under development. Bord Gáis Éireann’s 445MW combined cycle gas turbine (CCGT) electricity generation plant in Whitegate, Co. Cork, is expected to be commercially operational in mid-2010. The commissioning phase is critical as failure to fully test the plant may have a significant impact on plant integrity and performance when the plant becomes operational. Stringent project management controls are in place to manage these and other risks on all projects. These controls, which include detailed reporting on significant capital expenditure projects to the Investment and Infrastructure Committee, ensure projects are delivered on time and within budget to achieve strategic objectives and operational excellence.
In common with all operators, Bord Gáis Éireann is exposed to unplanned breakdowns or other performance issues with electricity assets, including wind farms. These risks are minimised through contractual arrangements for operating and maintenance procedures and through insurance.
Pensions: Bord Gáis Éireann operates defined benefit pension schemes for its employees. In common with most other schemes, stock market volatility during 2008 significantly reduced the value of assets held by the pension schemes. Bord Gáis Éireann, in cooperation with the pension fund trustees and members is currently engaged in the process of agreeing the implementation of increases in line with actuarial recommendations to ensure the schemes continue to be adequately funded in accordance with relevant requirements.
Information Systems: Effective and secure information systems are critical for the efficient management and accurate billing of customers and to support other operational activities. Business continuity plans are in place to manage the risk of any significant disruption to these systems. Controls to ensure the confidentiality and the integrity of customer and other data remain a priority. Arising from the theft of four laptops specific measures were taken to enhance these controls. These measures include, but are not limited to, the completion of the encryption process on all laptops during 2009, a review of the handling of data and information across the organisation and a revised governance structure to support the Information Security process which is capable of meeting the high standards of information security and data protection expected within Bord Gáis Éireann. Investment in systems, supported by strong project management, is ongoing.
Economic Climate: Current economic and financial market conditions are expected to continue during 2010. The impact of these risks on Bord Gáis Éireann’s operations and financial results is closely monitored and actively managed. Risk areas particularly impacted include customer collection, supplier performance, counterparty default and energy demand. Appropriate controls and mitigating actions are in place to address these exposures.
Appropriate actions are being taken by management to manage these risks. The enterprise wide risk process ensures that emerging risks are identified and that all known risks are continually assessed.
Internal Audit and Risk Management
As part of ongoing improvement to governance and risk management processes within Bord Gáis Éireann, a strategic decision was made in 2008 to combine the existing Risk Management and Internal Audit functions under a new Head of Internal Audit and Risk. The Head of Internal Audit and Risk reports directly to the Audit and Finance Committee and to the newly established Risk Committee. This new governance structure is now fully operational and provides a stronger basis for assurance that key business risks are being mitigated to the level expected by the Board. The operational resource requirements for Internal Audit are supported by an external service provider. This facilitates a stronger focus on the provision of specialised Internal Audit services in key business areas such as Energy Trading and Treasury and reflects Bord Gáis Éireann’s commitment to robust control and governance across the organisation.
Internal Controls
An internal control system encompasses the policies, processes, tasks, behaviours and other aspects of an organisation that, taken together:
| • | Facilitate effective and efficient operations by enabling the organisation to respond to risks. |
| • | Help ensure the quality of internal and external reporting. |
| • | Help ensure compliance with applicable laws, regulations and internal policies. |
The Board has overall responsibility for the systems of internal control and for monitoring the effectiveness of internal controls. Management is responsible for the identification and evaluation of significant risks together with design and operation of suitable internal control systems. These systems are designed to provide reasonable but not absolute assurance against material misstatement or loss.
In order to discharge that responsibility in a manner which ensures compliance with legislation and regulations, the Board has established an organisational structure with clear operating and reporting procedures, secured the services of appropriately qualified personnel, designed suitable lines of responsibility, put in place appropriate authorisation limits, made arrangements in respect of segregation of duties and delegated the necessary authority for decision making.
The system of internal control includes the following:
| • | Clearly defined organisational structure, with defined authority limits and reporting mechanisms to higher levels of management and to the Board. |
| • | Comprehensive budgeting systems with an annual budget which is subject to approval by the Board. |
| • | Comprehensive system of financial reporting. Cumulative monthly actual results are reported against budget and considered by the Board on a monthly basis. The Board questions significant changes or adverse variances and remedial action is taken where appropriate. |
| • | Comprehensive set of policies and procedures relating to operational and financial controls, including capital expenditure. Large capital projects require the approval of the Board, and are closely monitored on an ongoing basis by the Investment and Infrastructure Committee of the Board. |
| • | Comprehensive set of management information and performance indicators which are produced quarterly using a series of interrelated balanced scorecards. This enables progress against longer-term objectives and annual budgets to be monitored, trends evaluated and variances acted upon. |
| • | Risk management process which enables identification and assessment of risks that could impact the achievement of agreed business objectives and ensures that appropriate mitigating measures and controls are put in place. The process is led by an Executive Group Risk Management Committee chaired by the Chief Executive with regular reports to the Risk Committee. |
| • | Code of ethics that requires all employees to maintain the highest ethical standards in conducting business. |
| • | Responsibility by management at all levels for internal control over their respective business functions. |
| • | Corporate governance framework, which includes risk analysis and financial control review. This is monitored by Internal Audit and Risk, which reports to the Audit and Finance Committee and the Risk Committee on an ongoing basis. |
| • | Internal Audit and Risk conducts a systematic review of internal financial controls. In these reviews, emphasis is focused on areas of greater risk as identified by risk analysis. |
Bord Gáis Éireann has a robust framework in place to review the adequacy and monitor the effectiveness of internal controls covering financial, operational, compliance controls and risk management. The Board is satisfied that the system of internal control in place is appropriate for the business.
An ongoing process for identifying, evaluating and managing significant risks has operated throughout the year and up to the date of approval of the financial statements. This process accords with the Turnbull Guidance on the Combined Code.
The Board has reviewed the effectiveness of the systems of internal control up to the date of approval of the financial statements. A detailed review was performed by the Audit and Finance Committee, which reported its findings back to the Board. The process used to review the effectiveness of the system of internal control includes:
| • | Review and consideration of the programme of Internal Audit and consideration of its reports and findings. |
| • | Review of regular reporting from Internal Audit on the status of the internal control environment, and the status of issues raised previously from their own reports and reports from the external auditors. |
| • | Close liaison with the Risk Committee which reviews Risk Management Activity Reports from the Executive Group Risk Management Committee on risks, controls and implementation status of action plans. |
| • | Review and consideration of the report by the Chief Executive on the effectiveness of the operation of the systems of internal control, both financial and operational. |
| • | Review of reports from the external auditors which contain details of any material internal financial control issues identified by them in their work as auditors. |
Going Concern
The Financial Statements are prepared on a going concern basis as the Board, after making appropriate enquiries, is satisfied that Bord Gáis Éireann has adequate resources to continue in operation for the foreseeable future.
Prompt Payments
The Board acknowledges its responsibility for ensuring compliance with the provisions of the EU Directive 2000/35/EC – Late Payments in Commercial Transactions Regulations, 2002. Procedures have been put in place to identify the dates upon which invoices fall due for payment and for payments to be made on such dates, and accordingly, the Board is satisfied that Bord Gáis Éireann has complied with the requirements of the Regulations.
Health and Safety
The well being of Bord Gáis Éireann’s employees is safeguarded through the strict adherence to health and safety standards. The Safety, Health and Welfare at Work Act 2005 imposes certain requirements on employers and Bord Gáis Éireann takes the necessary action to ensure compliance with the Act.
Raising Concerns
The mechanism whereby Bord Gáis Éireann’s employees can raise concerns, which cannot be appropriately addressed through normal channels, is outlined within the Code of Business Conduct for Employees. A confidential e-mail address is available to all employees for the submission of any concerns, including those of a financial nature. The Code of Business Conduct for Employees, including the e-mail address, is published on the website.
Interests of Board Members and Secretary
The Non-Executive Board Members had no interest in Bord Gáis Éireann or subsidiary companies during the year. The Chief Executive and Secretary are beneficiaries of the Employee Share Ownership Plan.
Accounting Records
The Board has employed accounting personnel with appropriate expertise and provided adequate resources to the financial function to ensure compliance with the Board’s obligation to keep proper books of account. The books of account of Bord Gáis Éireann are held at Gasworks Road, Cork.
Political Donations
Bord Gáis Éireann did not make any donations to political parties during the year.
Auditors
In 2007, Bord Gáis Éireann received Ministerial approval in accordance with Section 15(2) of the Gas Act, 1976 for the appointment of Deloitte & Touche as Auditors for the years 2007, 2008 and 2009.
For and on behalf of the Board:
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| Chairman | Member of the Board |