Annual Implementation Report for the year ended 31 March 2024

TfW’s approach to risk

Implementation of actions

Changes

Commentary on assurance activity in practice

TfW’s risk and internal control framework

The integration of Pullman Rail into the group risk and internal framework has now been completed and a similar approach will be adopted for TfW Fibre.

During the year responsibility for the risk management activity of AIW was transferred to TfW and this has now been fully incorporated into the TfW risk management process.

There is clear evidence that the Executive Leadership Team and the Board have fully embraced TfW’s approach to risk.

Fraud risk

The Audit and Risk Committee recommended to the Board that it approve a counter fraud policy, and this was approved at its October meeting.

A counter fraud training programme has commenced which is compulsory for all relevant personnel. At 31 March 2024 x% of relevant staff had satisfactorily completed the course.

The cultural aspects of the control environment had been planned to be reinforced by the launch of TfW’s Code of Ethics in May 2023 with supportive training, however, one of TfW’s trade unions refused to allow it to be issued. Discussions are continuing to try and persuade the union that a Code of Ethics is good practice and positive for its members.

There have been no changes to the proposed approach.

Fraud risk is built into every assignment carried out by both the second line assurance team and internal audit. The process of alerting key members of management and the Chair of the Audit and Risk Committee appears to work well.  This year no such incidents were raised.

Financial and non-financial reporting risk

Internal control documentation of financial and non-financial reporting

Excellent progress continues to be made on this project, although a lack of suitable qualified resource has meant that progress has not been as good as planned during 2023/24. An additional member of staff with the right skill set has been recently recruited and it is hoped that there will be sufficient impetus provided for the project to be largely complete by 31 March 2025, although realistically it will probably be in the following year that it becomes fully embedded.

Non-financial reporting
The work on non-financial information is not as well advanced, but the need for it to be carried out to the same standard as for financial controls continues to be clear.

There have been no changes in the approach being adopted.

The Audit and Risk Committee decided that in the intervening period before the work in financial and non-financial reporting is completed, that an exercise be carried out to ensure there were no issues with the reporting of non-financial information. Internal audit has completed a review of the documentation, systems and controls over such information and are reported to the Audit and Risk Committee.

As the work on the enhanced internal control process is still work-in-progress, there has been little opportunity to see how the assurance activity is working in practice.

However, the work done to date has given comfort to the Audit and Risk Committee that, as far as the financial controls is concerned, there appear to be no material control weaknesses.

The Audit and Risk Committee is now satisfied that all material non-financial information has an appropriately documented system with appropriate internal controls to ensure that it is reported accurately. 

TfW’s internal audit function

The 2023/24 programme was satisfactorily completed and in addition certain ad hoc work was carried out at the request of management, which did not impede the completion of the programme.

Also, it carried it some ad hoc for the Audit and Risk Committee on material non-0financial information, which is commented on above.

The detailed programme for 2024/25 has been approved and is broadly in-line with the three-year plan.

An independent External Quality Assessment (“EQA”) was carried out by a member of The Chartered institute of Internal Auditors on the internal function and the report was issued in March 2024.

Its overall opinion was that TfW’s internal audit team partially confirms to the standards of the Institute of Internal Auditors and Public Sector Internal Audit Standards. There were a number of recommendations, many of which have already been implemented and some of these have been combined with work that was already underway to conform with the new Global Internal Audit Standards issued in January 2024.

None.

The Audit and Risk Committee has received many excellent reports from internal audit during the year. No individual finding or collection of findings was considered material and those reports that had an adverse conclusion were generally known to management and action was well underway by the time the report was finalised.

The work being carried out to implement the recommendations of the EQA and conforming with the new Global Internal Audit Standards should ensure that the high quality work being carried out by the internal audit function continues to be of the highest standard.

The scope of the external auditor’s work

There were no significant changes in the scope of work carried out by the external auditors for the year ended 31 March 2023. The materiality for the TfW Group, agreed with the Audit and Risk Committee was £66 million and the reporting threshold for misstatements to be reported to the Audit and Risk Committee was £3.3 million.

None.

The potential involvement of the external auditors in providing assurance on non-financial information has been deferred for a further year until the Audit and Risk Committee is satisfied with the level of internal assurance carried out.

The principal sources of assurance received by TfW’s Board on information used to monitor business performance

Considerable work has been carried out during the year on the KPIs that are used to monitor business performance, and some have been enhanced.

The Board now has a set of KPIs that it believes enables it to oversee TfW’s businesses more effectively.

A set of KPIs has been agreed, based on the more comprehensive suite of KPIs used by the Board which will be published on a regular basis.

The internal audit function has carried out a review of the systems and processes that are used to prepare the details set of KPIs used by the Board and those KPIs, which are published.