Corporate Governance
Internal controls
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 throughout 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 assurance providers such as Internal Audit, Corporate Responsibility and Risk & Compliance, who are independent of management.
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. This review includes:
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 the Company's New York Stock Exchange listing.
The latest review covered the financial year to 31 March 2007 and included the period to the approval of this Annual Report and Accounts.
Sarbanes-Oxley
National Grid has carried out an assessment of its internal control over financial reporting pursuant to section 404 of the US Sarbanes-Oxley Act 2002, the requirements of which the Company is subject to as a result of its listing on the New York Stock Exchange. The management of the Company, who is responsible 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 20-F filing that the system of internal control over financial reporting was effective as at 31 March 2007.