Transport for LondonStatement of Corporate Governance Assurance
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The Statement of Corporate Governance Assurance reports on the current standard of corporate governance, including internal control, within Transport for London (TfL). It identifies those areas where further work is to be undertaken and gives a brief description of the monitoring process to ensure the effectiveness of the Code of Corporate Governance.
TfL is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.
TfL also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised having regard to a combination of economy, efficiency and effectiveness. In discharging this accountability, Board members and senior managers are responsible for putting in place proper arrangements for the governance of TfL's affairs and the stewardship of the resources at its disposal, including arrangements for the management of risk.
To this end, TfL has approved and adopted a Code of Corporate Governance, which is consistent with the principles and reflects the requirements of the CIPFA/SOLACE framework and the requirements of the Accounts and Audit Regulations 2003.
A copy of TfL's Code is on tfl.gov.uk or can be obtained from: TfL Company Secretariat, Windsor House, 42-50 Victoria Street, London SW1H 0TL.
Purpose of the system of corporate governance assurance
TfL has put in place appropriate management and reporting arrangements to enable it to satisfy itself that its approach to corporate governance is both adequate and effective in practice. Specifically, it has an established system of internal control. This is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of TfL's policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically.
Corporate governance in TfL
Corporate governance is the system used to direct, manage and monitor an organisation and enable it to relate to its external environment. The fundamental principles of corporate governance, to which TfL is fully committed are openness, inclusivity, integrity and accountability.
Using the nationally recognised CIPFA/SOLACE framework, TfL developed and published a Code of Corporate Governance in 2002 tailored to its own circumstances, which is designed to make its adopted practices in this area open and explicit.
On an annual basis, TfL agreed to undertake a wide-ranging review of its relevant activities involving all senior managers to determine the degree to which TfL's methodologies conform to the Code's requirements. Where they have been found wanting, action plans are being developed to identify and implement remedial action.
TfL's governance structure
The Mayor, who serves as its Chair, appoints the TfL Board members. The Board determines and agrees TfL's strategic direction and oversees the performance of the executive team.
The Board has four committees:
- Finance
- Audit
- Remuneration
- Safety, Health and Environment
The Audit Committee has been delegated the responsibility for overseeing corporate governance in TfL. It has received reports on the implementation of the Code of Corporate Governance, the Statement of Assurance contained in these accounts and the results of the compliance review. It receives regular update reports from the General Counsel and the Director of Internal Audit and is responsible for the annual assurance process.
To ensure that the Code is integral to the routine functioning of TfL the General Counsel has the overall responsibility for its operation. In addition, the Director of Internal Audit has the responsibility for independently conducting an annual review of the adequacy and effectiveness of the Code and the extent of TfL's compliance with it.
The Commissioner of TfL, advised by his chief officers, is responsible and accountable for the delivery of the day-to-day operations of TfL.
There are three advisory panels, drawn from the Board members and senior management, which provided strategic advice to the Commissioner on development and the carrying out of policy in TfL.
- Rail Transport
- Surface Transport
- London Underground
The London Underground and Surface Transport panels were established in 2003/04. The former in response to the integration of LU into TfL, the latter reflecting the internal merger of the Surface Transport and Street Management operations.
The dimensions of corporate governance
There are five dimensions to the corporate governance activities of TfL:
- Public focus
- Structures and processes
- Risk management and internal control
- Service delivery arrangements
- Standards of conduct
In each area, TfL is working to ensure that good corporate governance is fully incorporated into the culture of the organisation, is applied within the management processes and is transparent to all stakeholders.
Within the public focus dimension:
- The Mayor has published his Transport Strategy which clearly sets out where TfL wants to be
- TfL regularly publishes public reports on its performance
- TfL has developed and implemented numerous strategies to consult with all interested parties and has processes in place to ensure the results are given due weight in decision-taking
- The public has easy access to TfL Board papers and meetings
Within the structures and processes dimension:
- The roles and responsibilities of Board members and staff managers are well-defined
- TfL has procedures to ensure its activities are properly planned, implemented, monitored and reviewed
Within the risk management and internal control dimension:
- TfL has in place a system to identify and manage all significant risks
- TfL has robust processes to ensure the maintenance of proper internal control
Within the service delivery arrangements dimension:
- TfL has a management structure geared to the delivery of efficient, effective and economic services
- TfL's budget process allocates resources according to the priorities in the MTS
- TfL has systems in place to set targets and monitor performance for service delivery on a sustainable basis and with reference to equality policies
Within the standards of conduct dimension:
- TfL has formal codes of conduct for Board members, staff and contractors
- TfL has arrangements in place to ensure the actions of Board members and employees are not influenced by prejudice, bias or conflicts of interest
Risk management
TfL has a maturing risk management process that identifies both strategic and operational risks. Mitigation strategies are in place to counter all strategic risks.
The top five risks on the Strategic Risk Map are currently:
- Project delivery
- Quantity and quality of people
- Effective contract management
- Use and availability of funding
- Resilience to major external events
As part of its overall corporate governance brief, the Audit Committee has specific responsibility for assuring the Board that effective risk management arrangements are in place. Risk management is a standing agenda item at all Committee meetings. Going forward, the risk management process will also be subject to annual review by TfL's Director of Internal Audit.
The emphasis during 2006/07 will be to build up on the process in place and develop a best-practice model.
Specific areas to be addressed include:
- Finalising a streamlined senior management risk reporting process
- Improving Board and Audit Committee reporting
- Agreeing on a common understanding of the risk TfL is prepared to accept as part of its normal business
- Performance monitoring arrangements to ensure risk management effectiveness
Responsibilities and review of effectiveness
TfL's General Counsel has the responsibility for:
- Overseeing the implementation, and monitoring the operation of the Code
- Reviewing the operation of the Code in practice
- Reporting annually to the Audit Committee on compliance with the Code and any changes that may be necessary to maintain it and ensure its effectiveness in practice
In addition, TfL's Director of Internal Audit has the responsibility independently to review the adequacy and effectiveness of the Code and the extent of TfL's compliance with it. The Director of Internal Audit reports annually on these matters to the Audit Committee.
On the basis of reports from the General Counsel and the Director of Internal Audit, initially to the Commissioner and the Chief Officers and then to the Audit Committee, we are satisfied that TfL's corporate governance arrangements are adequate and are operating effectively.
Signed
K. Livingstone
Chair of the TfL Board
P. Hendy
Commissioner
On behalf of the Board members and the Chief Officers of TfL
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