Accountability report 2020/21

Our Accountability Report outlines key features of how we manage our organisation. It has three sections.

Over the following pages our Corporate Governance report explains who our Board and senior management team are, how they work and the governance arrangements in place to ensure effective management and oversight of our resources to achieve our objectives.

Our Remuneration and Staff Report describes how we address Board and senior management pay as well as providing an overview of the make-up of our staff numbers.

Our Parliamentary Accountability and Audit Report brings together additional requirements requested to demonstrate our accountability to the UK and Welsh Governments, regularity of expenditure and the opinion from our Auditor.

Corporate Governance Report

Directors’ Report

The Chief Executive is supported by a team of Executive Directors and Directors who together form our Executive Team (ET). Two new Executive Directors joined us in September 2020: Rachael Cunningham, Executive Director of Finance and Corporate Services, and Sarah Jennings, Executive Director of Communications, Customer and Commercial.

Position	Post holder	Length of ET service
Chief Executive	Clare Pillman	26 February 2018 to present
Executive Director of Evidence, Policy and Permitting	Ceri Davies	1 April 2013 to present
Executive Director of Finance and Corporate Services	Kevin Ingram	1 April 2013 to 9 April 2020
Executive Director of Finance & Corporate Services	Rachael Cunningham	7 September 2020 to present
Executive Director of Operations	Gareth O’Shea	27 April 2015 to present
Director of Corporate Strategy and Development	Prys Davies	1 April 2019 to present
Executive Director of Communications, Customer and Commercial	Sarah Jennings	7 September 2020 to present

Our Executive Team Register of Interests as at March 2021 is included here:

Name	Position	Interest	Individual	Role
Clare Pillman	Chief Executive	No interests to declare	No interests to declare	No interests to declare
Ceri Davies	Executive Director of Evidence, Policy and Permitting	Executive or Non-Executive Board, Committee or Trust Membership	Personal	Member of the FLEXIS Advisory Board, Welsh European Funding Office funded project supporting energy research in Wales.
Ceri Davies	Executive Director of Evidence, Policy and Permitting	Other	Personal	Member of the Chartered Institute of Waste Management
Prys Davies	Director of Corporate Strategy and Development	Executive or Non-Executive Board, Committee or Trust Membership	Personal	School Governor, Ysgol Pencae, Cardiff
Gareth O’Shea	Executive Director of Operations	Executive or Non-Executive Board, Committee or Trust Membership	Personal	Member of an independent funding panel within Merthyr Tydfil Area to evaluate and recommend project bids on behalf of the Invest Local EU funded programme.
Rachael Cunningham	Executive Director of Finance & Corporate Services	Executive or Non-Executive Board, Committee or Trust Membership	Personal	Trustee of Chwarae Teg Charity
Sarah Jennings	Executive Director of Communications, Customer and Commercial	Executive or Non-Executive Board, Committee or Trust Membership	Personal	Trustee of National Botanic Garden of Wales
Sarah Jennings	Executive Director of Communications, Customer and Commercial	Executive or Non-Executive Board, Committee or Trust Membership	Personal	Trustee of Community Foundation Wales

Register of Interests for our Board members

Statement of Accounting Officer’s Responsibilities

Paragraph 23 (1) of the Schedule to the Natural Resources Body for Wales (Establishment) Order 2012 requires Natural Resources Wales to produce, for each financial year, a Statement of Accounts in the form and on the basis set out in the Accounts Direction. The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of Natural Resources Wales and of the income and expenditure, changes in taxpayers’ equity and cash flows for the financial year. In preparing the accounts, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual (FReM) and to:

• observe the Accounts Direction issued by HM Treasury including the relevant accounting and disclosure requirements and apply suitable accounting policies on a consistent basis
• make judgements and estimates on a reasonable basis
• state whether applicable accounting standards as set out in the FReM have been followed, and disclose and explain any material departures in the financial statements
• prepare the financial statements on a going concern basis
• confirm that there is no relevant audit information of which Natural Resources Wales’ auditors were unaware, and take all steps to make themselves aware of any relevant audit information and to establish that Natural Resources Wales’ auditors are aware of that information
• confirm that the Annual Report and Accounts as a whole is fair, balanced and understandable and take personal responsibility for it and the judgements required for determining that it is fair, balanced and understandable

The Additional Accounting Officer for the Welsh Government has designated the Chief Executive of Natural Resources Wales as its Accounting Officer. The Chief Executive’s responsibilities as Accounting Officer are the propriety and regularity of the public finances for which she is answerable; the keeping of proper accounts; prudent and economical administration; avoidance of waste and extravagance; and the efficient and effective use of all the resources as set out in the Memorandum for the Accounting Officer for Natural Resources Wales.

Governance Statement

This Statement sets out the governance structures, internal control and assurance frameworks that have operated within NRW during the financial year 2020/21 and accords with HM Treasury and Managing Welsh Public Money guidance.

As the designated Accounting Officer for Natural Resources Wales, my role is also to safeguard public funds and organisational assets by putting in place arrangements for the governance of our affairs and effective exercise of our functions. I can confirm that the information in our Annual Report and Accounts is a true and fair account of how the organisation has delivered its functions this year. I also confirm that there is no outstanding information that has been brought to my attention or that I am aware of that has not been brought to the attention of Audit Wales.

Our governance structure

Our organisational structure shows how we are set up to work and deliver our objectives.

Our board members are appointed by Welsh Ministers in accordance with the Code of Practice for Ministerial Appointments in Public Bodies, and as such our Chair is accountable to our sponsor minister in the Welsh Government.

We currently have 12 remunerated Board members, led by our Chair, Sir David Henshaw, with 10 non-executive members and myself as an executive member of the Board. Professor Steve Ormerod is the appointed Deputy Chair of NRW and Julia Cherrett is the Senior Independent Director (SID). The role of SID was introduced to support the Chair in his role; to act as an intermediary for other non-executive directors when necessary; to lead the non-executive directors in the oversight of the Chair and to ensure there is a clear division of responsibility between the Chair and Chief Executive. There was one change to our Board this year, which was the resignation of Mr Chris Blake from his role as a non‑executive Director of the Board in February 2021.

Following an external recruitment process, Colette Fletcher was appointed to the role of Head of Governance and Board Secretary from October 2020.

To carry out our duties, we meet as a full Board with additional scrutiny being undertaken by six committees. Our Executive Team (ET) provides strategic and operational updates to our Board and committees for scrutiny and decision as required.

Each committee is chaired by a Board member and, with the exception of the Evidence Advisory Committee (EAC), each includes at least three other non-executive Board members. Other non-executive Board members have an open invitation to attend committee meetings in a non-voting capacity. We do not have a Nominations Committee, as our non-executive board members are appointed by Welsh Ministers. The following sections outline the work focus areas and attendance of our Board and committees.

Where a subsequent term has been approved, it has been reflected in the ‘Current end date’ within the table. Where this applies the term has been marked with a *

Non-Executive members	Term	Start date	Current end date
Sir David Henshaw (Chair)	1	1 November 2018	31 October 2023
Professor Steve Ormerod	1	1 November 2018	31 October 2022
Karen Balmer	2	9 November 2015	8 November 2022
Chris Blake	2	9 November 2015	24 February 2021
Catherine Brown	1	1 November 2018	31 October 2022
Julia Cherrett	1*	1 November 2018	31 October 2025
Geraint Davies	1	1 January 2019	31 October 2024
Howard Davies	2	9 November 2015	31 August 2021
Dr Elizabeth Haywood	2	9 November 2015	31 August 2021
Zoe Henderson	2	9 November 2015	8 November 2022
Dr Rosie Plummer	1*	1 November 2018	31 October 2024
Professor Peter Rigby	1*	1 November 2018	31 October 2023

Board Meetings

We held six two-day meetings and one development day this year – all were held virtually. Standing items on our agenda include: in-year finance; performance reporting; response to Climate and Nature Emergencies; and strategic and operational updates from the Chair, Chief Executive and committees.

We publish a wide range of information regarding our work on our website, including papers to be considered by the Board in advance of those meetings held in public. Board papers are prepared using the latest evidence available and receive internal scrutiny and approval prior to Board meetings.

All future meeting dates and previous agendas are available on our website, as well as the papers and minutes from our public sessions. NRW Executive Team, our Board and committees have continued to meet throughout Covid-19 lockdown virtually. Due to lockdown restrictions we have been unable to meet in public, but from September 2020 we have allowed the public to observe virtual meetings. The lack of face to face meetings has meant that the Board has not been able to move around the different regions of Wales as usual or hold stakeholder engagement sessions as planned. External engagement is one of the elements of our work that has been most affected, leading to some delays in large scale engagement and training programmes.

Board member attendance 2020/21

Name	Meeting attendance	Development days attendance
Sir David Henshaw (Chair)	6 out of 6	1 out of 1
Professor Steve Ormerod	6 out of 6	1 out of 1
Karen Balmer	6 out of 6	1 out of 1
Chris Blake	4 out of 5	1 out of 1
Catherine Brown	6 out of 6	1 out of 1
Julia Cherrett	6 out of 6	1 out of 1
Geraint Davies	6 out of 6	1 out of 1
Howard Davies	6 out of 6	1 out of 1
Dr Elizabeth Haywood	6 out of 6	1 out of 1
Zoe Henderson	6 out of 6	1 out of 1
Dr Rosie Plummer	6 out of 6	1 out of 1
Professor Peter Rigby	6 out of 6	1 out of 1
Clare Pillman (Chief Executive)	6 out of 6	1 out of 1

Audit and Risk Assurance Committee

The Audit and Risk Assurance Committee’s (ARAC) principal role is to advise the Board and support the Accounting Officer in monitoring, scrutinising and challenging the arrangements in place for audit, governance, internal controls and risk management. The Chair of this Committee is Catherine Brown. The Chief Executive attends every meeting as NRW’s Accounting Officer, along with our Executive Director of Finance and Corporate Services. Members of ET now attend the committee to discuss any limited assurance internal audit reports.

This year ARAC addressed a range of issues including:

• Oversight and Governance of Timber Sales
• Improvements to our risk management approach
• Internal Audit Plan 2020/21
• Annual Report and Accounts 2019/20 and plans for this report, 2020/21
• Senior Information Risk Owner report, including Cyber Resilience

Board member ARAC attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Catherine Brown (Chair)	7	7
Karen Balmer	7	7
Dr Rosie Plummer	7	7
Professor Peter Rigby	7	5

People and Remuneration Committee

The People and Remuneration Committee (PaRC) considers matters relating to people management, reward and organisational change. This includes oversight of the pay and conditions of employment of the most senior staff, an overall pay strategy for all staff employed by Natural Resources Wales, pension scheme provision, organisational design, wellbeing, health and safety, customer care, equality and diversity and development of the Welsh language scheme. The Chief Executive attends every meeting.

The Committee addressed a range of issues during the year including:

• Organisational Design
• Wellbeing, Health and Safety and Serious Incident Reviews
• Scrutiny of proposed People Management policies
• Recruitment and the Recruitment Process
• Organisational Succession Planning

Board member PaRC attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Zoe Henderson (Chair)	4	4
Karen Balmer	4	3
Howard Davies	4	2
Julia Cherrett	4	3

Finance Committee (formerly Finance, Planning and Performance Committee)

During 2020, the work of several Board sub-groups was incorporated into the Finance, Planning and Performance Committee (FPPC) and the name of the Committee has since been amended to the Finance Committee. The Committee provides advice, oversight and scrutiny on strategy, management and performance in relation to finance, business planning and performance, charge schemes and commercial matters. In carrying out its role, the Committee focuses on strategic direction and development, however it also has a role in scrutinising performance and delivery. Following the resignation of Chris Blake as a Board member, Sir David Henshaw is acting as Interim Chair of the Committee until a new Chair is appointed.

This year the Committee considered the following:

• Monitoring in-year financial performance
• Review of 2019/20 delivery and performance
• Financial and Business Planning 2021/22
• Strategic Review of Charging
• Development of the Commercial Strategy
• Corporate Plan 2022 to 2027

Board member Finance Committee attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Chris Blake (Chair, to February 2021)	7	6
Sir David Henshaw (Interim Chair, from February 2021)	1	1
Julia Cherrett	7	7
Dr Elizabeth Haywood	7	6
Dr Rosie Plummer	7	6

Protected Areas Committee (PrAC)

The Board has delegated its statutory responsibilities in relation to legislation concerned with nature conservation and protected landscapes to the Protected Areas Committee (PrAC). PrAC members also support the Executive and Board by providing advice on wider protected area issues and strategic casework, including landscape management, Designated Landscapes, and National Nature Reserves.

Board member PrAC attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Howard Davies (Chair)	4	4
Geraint Davies	4	4
Dr Elizabeth Haywood	4	4
Professor Steve Ormerod	4	4
Dr Rosie Plummer	4	3

Flood Risk Management Committee (formerly Advisory Group)

The Committee is advisory and reports to the Natural Resources Wales Board. Its primary responsibilities are to scrutinise Flood Risk Management (FRM) investment programmes for current and future years, and to consider key issues which may affect the delivery of FRM related work in Wales. In May 2020 the name was changed, to bring it in line with other Board Committees.

The Committee usually comprises four non-executive members of the Board along with the Executive Director for Finance and Corporate Services, Executive Director for Evidence, Policy and Permitting, Head of Flood and Incident Risk Management and Head of Finance.

FRMC reviewed areas including:

• prioritisation of flood risk management activities
• governance of the flood risk management capital programme
• the latest medium-term plan for our capital programme
• the current performance indicators relating to the condition of NRW maintained flood risk assets
• the Internal Drainage District rates and precepts for 2021/22

Board member FRMC attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Dr Elizabeth Haywood (Chair)	3	3
Chris Blake (to February 2021)	3	2
Julia Cherrett	3	3
Geraint Davies	3	2

Evidence Advisory Committee

The Evidence Advisory Committee (EAC) was established in 2020 to provide independent advice and challenge in relation to NRW’s evidence function. The Committee also helps to strengthen understanding in the wider research community, and with evidence users in government, of evidence processes and priorities.

The Committee comprises two non-executive members of the Board, seven independent external members, the Executive Director of Evidence, Policy & Permitting and the Head of Knowledge and Evidence.

At its inaugural meeting in December 2020, the Committee discussed areas including evidence governance within NRW, the work of the Knowledge and Evidence Department and that of the Integrated Evidence Group, and received presentations demonstrating the breadth of activities across the organisation around areas of public concern.

Board member EAC attendance 2020/21

Name	Number of meetings	Number of full meetings attended
Professor Peter Rigby (Chair)	1	1
Professor Steve Ormerod	1	1

Board effectiveness

The Board had an externally facilitated session in October 2020, where they discussed progress made towards their agreed collective vision. They also shared what they had learned about their own leadership and the leadership of others through Covid.

A joint session, with Board and ET, has been deferred twice due to Covid restrictions because of the preference that the session should be held face to face.

Our Executive

Day-to-day management of our organisation is delivered through the ET, comprising myself as Chief Executive and five Executive Directors and Directors who report to me. ET meet twice each month to consider core corporate business, for example finance updates, performance information, wellbeing health and safety, the strategic risk register, etc. They also scrutinise and consider decisions concerning strategy, policy and operational issues.

Below ET, our Leadership Team plays a leading role in managing the business on a day to day basis. Its members are all the Heads of departments that report to our ET including those in our corporate functions (such as Finance, HR, Communications). The Leadership Team Group (LTG) meets monthly to resolve cross-cutting issues, for example the initial work around budget priorities, and to review detailed performance, such as our monthly management information.

Our structure emphasises place-based delivery: seven Heads of Place within the single Operations Directorate each oversee delivery of all our functions in a specific region of Wales. We then have nominated Heads of Service (who are each also a Head of Place) who take a lead for overseeing delivery of a particular function throughout Wales. The Heads of Service work closely with our policy leads - called Heads of Business – who oversee the strategic direction of our work across Wales.

To ensure a join up between strategic thinking and operational delivery, we have a series of Business Boards which set the policy requirements and plan the operational nature of our work across the new place-based structure. These are each led by the Head of Business / Head of Service.

We produce an annual business plan that outlines steps we will take towards meeting commitments in our longer-term Corporate Plan, which we have agreed with Welsh Government will be rolled on to 2023. The Business Plan includes corporate targets and outcomes that we monitor delivery against. Detailed Management Information is reviewed at Leadership Team Group meetings with a summary Business Plan Performance Dashboard being reviewed by ET before scrutiny by the NRW Board and Welsh Government on a quarterly basis.

COVID-19 has affected our ability to deliver on some objectives in the short term, for example we have had to rethink our approach to engagement with the community. We had not yet published our annual Business Plan for 2020/21 when significant lockdown restrictions were implemented, therefore we agreed with Welsh Government to delay publication whilst we reviewed our delivery plan in light of Covid-19. We published this revised plan in November 2020. Following the recent elections to the Senedd, we will review the Interim Business Plan for 2021/22 in the light of the anticipated Budget and Remit letters from Welsh Government.

We are fortunate that absence as a result of Covid-19 has not been a significant issue. We did however put in place business continuity plans to ensure cover for key individuals or to deal with multiple absences which were agreed with Welsh Government.

As a category 1 responder under the Civil Contingencies Act (2004) we are experienced in reacting to incidents that can affect many parts of the organisation. We treated our response to Covid-19 as an incident and set up both Tactical and Strategic Incident Response Groups (TIRG and SIRG) with representatives from across NRW to manage the situation and provide the guidance and steer to the rest of the organisation. Through our Tactical IRG we set up ‘cells’ which linked through to all our business boards and other service areas to provide advice and guidance both internally to steer colleagues on what to do, and externally to our partners and customers on how we were managing the situation. We have used both the SIRG and TIRG to also consider our recovery work and decided to also include our management of the implications of EU Exit for us within this governance framework.

Ministerial Directions

We have not received any Ministerial Directions this year.

Our Internal Control Framework

Our internal control framework consists of policies, procedures, measures and accreditations we have in place to protect our resources while we deliver our objectives.

The pace of change to adapt to the pandemic restrictions has been rapid but also controlled. Our key financial controls within automated systems and our schemes of delegation to ensure appropriate segregation of duties remain in place and current. The ‘Managing our Money’ and ‘NRW Statutory and Legal Scheme’ documents were both reviewed and approved by the Board during the last year. Where significant changes had been implemented new controls were identified, for example managers were asked to maintain ICT asset lists of additional items which were taken home to support increased and sustained working from home.

Risk management

A robust risk management framework is an essential component in managing our business, protecting our resources and reputation. In 2020, we adopted an improved risk management framework and this year continued to embed that framework, with significant improvements in the management and reporting of risks, and we have had several meaningful discussions at the ET, Audit and Risk Assurance Committee and at other committees.

The ET owns the strategic risk register with each strategic risk being owned by a Director. Below ET, each Head of Place and Head of Business owns and monitors particular risks, scrutinised and challenged by the relevant Business Board, and our LTG examines cross‑cutting issues and identifies any risks that should be escalated to the strategic risk register.

ARAC scrutinises and challenges the strategic risk register. It gains assurance on the effectiveness of the risk management framework and provides the Board with advice to enable it to assure itself of the effectiveness of the risk management framework. Other Board committees review relevant strategic risks. The Board has agreed Risk Appetite Statements for the majority of our strategic risks and conducts an annual review of our strategic risks.

Information assurance

We are committed to ensuring data and information is well governed and managed, and that we continue to achieve a balance between openness and security, making sure that staff and customers are assured of suitable levels of protection. The Senior Information Risk Owner (SIRO) continues to lead an integrated programme of work to strengthen our response to resilience against cyber and information security threats. We have once again passed our annual Cyber Essential Plus accreditation which is approved by the National Cyber Security Centre and independently audited by a qualified third-party specialist. We will continue to deliver a cyber security programme of work based on our recent cyber strategy. This includes initiatives for improving staff awareness, including cyber security online training.

We have mandatory annual online learning courses for staff on General Data Protection Regulation (GDPR) and Information Security to ensure everyone is aware and up to date on how we manage the information we receive and hold. We are aware that completion rates for mandatory online learning are not currently at 100% (although they have improved significantly over recent months), and this will be a focus for next year.

This year I was pleased that we have had no information breaches which were reportable to the Information Commissioners Office (ICO).

Number of cases reported to the Information Commissioner's Office (ICO):

• 2020/21: 0
• 2019/20: 0
• 2018/19: 1

Declaration of Interest

Our Managing Conflict of Interest policy and guidance supports all staff and Board members with our continuous process to declare relevant personal interests to help us manage any potential or perceived conflicts with their professional roles. Reviews by Internal Audit conducted over the last year have highlighted that significant improvements are required to our Conflict of Interest policy, procedures, training and reporting mechanisms. This work is underway and is due to conclude in September 2021.

Whistleblowing

We are committed to the highest standards of openness, probity and accountability.

Therefore, we have established measures in place to raise serious concerns about malpractice or impropriety. Our framework includes access to an external reporting hotline where concerns can be raised anonymously. From 2020/21, NRW became a ‘Prescribed Person’, being added to a list of organisations and individuals that a worker may approach outside their workplace to report suspected or known wrongdoing.

Number of whistleblowing cases reported:

• 2020/21: 0
• 2019/20: 2
• 2018/19: 0

Fraud

Our Counter Fraud Strategy is supported by a Counter Fraud, Bribery and Corruption Policy and a Fraud, Bribery and Corruption Response Procedure. We have mandatory annual online learning courses for staff on Anti-Fraud and Anti-Bribery and Corruption to help staff identify instances of fraud, bribery and corruption and to ensure staff are aware of their professional responsibilities. We are aware that completion rates for mandatory online learning are not currently at 100% (although they have improved significantly over recent months), and this will be a focus for next year.

We have received ten allegations of fraud, which have been handled in accordance with NRW’s anti-fraud, bribery and corruption process. These are reported to our Audit and Risk Assurance Committee. All investigations have been managed either by an Accredited Counter Fraud Specialist or similarly qualified external investigators. The final report on each case is referred to independent senior staff.

Number of allegations reported:

• 2020/21: 10
• 2019/20: 7
• 2018/19: 23

Compliance with the UK Corporate Governance Code

We have completed a basic review and established that our organisational structure, policies and procedures are set in line with the UK Corporate Governance Code.

Our leadership is consistent with expected senior management roles and responsibilities; supporting procedures are in place to ensure Board roles can operate effectively; our reporting routes are clear to ensure accountability and appropriate division of duties and key internal controls are in place; remuneration of senior staff is considered by non‑executives to ensure independence and we have regular meetings with our key stakeholders to maintain constructive working relationships.

Our Assurance Framework

Our assurance framework comprises of the following measures which are in place to ensure I receive timely evidence that the controls required are in place and working appropriately.

Internal Audit

We have an Internal Audit team which operates in accordance with the Public Sector Internal Audit Standards (PSIAS). Each year an annual audit plan is developed based on a prioritisation of the key risk areas in relation to the fundamental activities of Natural Resources Wales, and its corporate plan, considering other sources of assurance. The plan is designed through consultation with myself and my ET, LTG and in discussion with the Audit and Risk Assurance Committee.

Following the departure of the Internal Audit Manager in October 2020, as an interim solution pending the recruitment of the replacement, the two senior staff in the team have overseen delivery of the plan. We have recently appointed a new Head of Internal Audit, at Leadership level, who joined the organisation on 1st July 2021.

As a result of Covid-19, Internal Audit followed the advice offered by the professional bodies (CIIA and ACCA). We reviewed the remaining audit plan for the year to establish the most critical audits, likely to have a significant bearing on the audit opinion, which we prioritised, and those that could be paused, deferred or cancelled. Internal Audit also considered the business’ capacity to deal with audits alongside dealing with the event itself. All changes to the audit plan have been ratified by ARAC. As a result, the key reviews from 2020/21 plan have been delivered, with no material impact on the end of the year overall opinion.

Total number of audits 2020/21: 18

Substantial Audit Rating: 1

Moderate Assurance Rating: 11

Limited Assurance Rating: 5

Unsatisfactory Assurance Rating: 0

In draft: 1

Status	Definition
Substantial	The framework of governance, risk management and control is adequate and effective.
Moderate	Some improvements are required to enhance the adequacy and effectiveness of the framework of governance, risk management and control.
Limited	There are significant weaknesses in the framework of governance, risk management and control such that it could be or could become inadequate and ineffective.
Unsatisfactory	There are fundamental weaknesses in the framework of governance, risk management and control such that it is inadequate and ineffective or is likely to fail.

 

Our Internal Audit team deliver the audit plan with regular progress updates and feedback to the Audit and Risk Assurance Committee. The opinion of the Interim Internal Audit Manager(s), as set out in the annual assurance report, is as follows:

During 2020/21 NRW has faced the challenges posed by the Covid pandemic and successfully enacted its business continuity plans. Its investment in technology allowed for the business to quickly adapt to staff homeworking. Significant work has continued over the course of this year to improve the consistency and robustness of controls across the organisation, for example, it has progressed as intended in establishing a Programme Management Office.

The annual audit opinion is primarily informed by the delivery of the Internal Audit plan. This year we provided a limited assurance on three audit areas: Welsh Purchasing Card, Grants and Staff Performance Management. We have also provided an opinion of ‘some progress’ on two full follow up audits, where we had previously provided a ‘limited’ opinion; these were Timber Sales Contracts and Conflicts of Interest.

The audit coverage also included: Cyber Security, Information Asset Owners, Budget Management, Lone Working, Management of Colliery Spoil Tips, Risk Management, Internal Governance, Serious Incident Reviews, GPDR Compliance, Quality of Evidence Reports, Waste Regulation and Enforcement; all of which received ‘moderate’ assurance. An audit of Procurement under £25k received a ‘substantial’ assurance opinion. We have conducted one piece of consultancy work which was the IR35 Off Payroll, Working Process Review. As consultancy, this did not carry an assurance opinion.

We found continuing cultural issues in the Staff Performance Management audit, with poor performance going unchallenged and lack of compliance with the prescribed process when it was challenged. There was an absence of the second line of defence to monitor compliance and quality assure performance management.

Similar issues were identified within the Welsh Purchasing Card audit. At the time of the audit 39% of staff had a spending card and the annual spend was circa £2million. We found significant weaknesses in management oversight, that demonstrated a lack of understanding by managers of their duties. Also, following Organisational Design in 2019/20, reduced resources resulted in the compliance checks by the second line of defence not being conducted.

For the Grants audit, it highlighted that while NRW had recognised that it did not have the correct staffing structure and expertise to support delivery of its grant programme early in 2020/21, progress on implementing the new structure has been slow. It has been somewhat mitigated by the temporary recruitment of financial expertise, but the grant programme remained significantly under-resourced. A common issue through the audit was the need to strengthen evidencing of decisions and audit trails for activities, which is a re-occurring theme for NRW. The audit also identified weaknesses in the segregation of duties and the management of conflict of interests (both internal and external). While the audit acknowledged that controls have been designed to be proportionate, further work is needed to develop a more rounded risk criteria which demonstrably links to the grants processes to be followed.

For the Management of Colliery Spoil Tips, while we provided a ‘moderate’ assurance opinion due to the controls and oversight that were being implemented, it again demonstrated that prior to the Flood events of February 2020 there had been an absence of management oversight. We also found poor audit trails being retained to evidence that NRW had discharged its responsibilities. The ‘moderate’ audit of Lone Working similarly evidenced a lack of management oversight to verify that the right people are using the right tools to safely work alone.

Our follow-up of both Timber Sales Contracts and Conflict of Interest found that while actions had been taken to address recommendations, issues remained with compliance and oversight. The Conflict of Interest audit again highlighted that progress had been impacted by a recognised lack of resources in the Governance Team, which is still being resolved. We are working with Management on the need for action owners to ensure that any changes made are working as intended, embedded and risks have been mitigated, prior to reporting recommendations as complete.

In addition, progress on dealing with significant long-standing weaknesses in the effective application of contract management from a procurement perspective has been slow and a decision is still required on resource to drive through improvements, at the time of writing.

NRW itself recognises that its residual risk for Strategic Risk 07 – Compliance remains high, with the impact ‘major’ and the likelihood ‘probable’, with the causes being potentially due to lack of understanding of policies and processes, the culture of optimism bias, failure to learn lessons and weak second line of defence functions.

This risk is, in part, being addressed by the establishment of the Three Lines of Defence Working Group, which seeks to build on the work already done as part of the Governance & Risk Improvement Plan (GRIP) to deal with poor governance and compliance. This is a positive move and as the work of this group and other groups progresses, it should result in improvements in the control, governance and risk management environment in future years.

Internal Audit have been invited to sit as observers on this group which supports the improved working relationship with management and the increased value placed on the work done by Internal Audit. We now provide regular updates to the Leadership Team Group and Executive Team on progress against the plan and any upcoming issues. Going forward a new approach will be adopted for sharing learning from audits across the organisation.

In conclusion, our professional evaluation of internal controls, governance and risk management has led us to conclude that that in 2020/21 there remains significant weaknesses in the framework of governance, risk management and control such that it could be or could become inadequate and ineffective. We can therefore offer a limited overall assurance opinion for the past year.

External audit

Independent scrutiny forms an important part of our assurance, providing evidence of our ways of working in relation to best practice and industry standards. In some parts of the organisation we are subject to, or we opt for, external audits or reviews of our work. Some are annual for example UK Woodland Assurance Scheme or the ISO14001:2015 to maintain our environmental management system. Others we request as one of many pieces of work to give ourselves further information about particular areas or activity.

Following our publication of Grant Thornton’s independent review of our timber sales operations and its sharing with the Senedd Cymru’s Public Accounts Committee (PAC), work is progressing to embed changes and improvements into business as usual across the organisation. During 2020/21 we received income totalling £0.1million (£2.6million in 2019/20) in respect of the standing sales plus timber contracts. We are continuing to embed changes and improvements in our timber sales operations, led by our Executive Director of Communications, Customer and Commercial. This work is overseen by the Finance Committee and progress is reported to the Audit and Risk Assurance Committee.

Effectiveness of internal controls

To provide additional assurance that these controls are in place and working well within NRW, members of ET and Chairs of Business Boards have each signed a Certificate of Assurance and completed an Internal Control Checklist, which required them to make an evidence-based assessment of the effectiveness of the control framework in place for their Directorate/Business Board. This year we achieved a 100% return rate of the checklists and certificates, although the level of detail varied between submissions. We have completely reviewed the process for the coming year to improve consistency of detail and to gain information from a wider range of staff within NRW when completing the returns.

Overall, this year’s results have shown an improvement on the previous year, although there is still a lot of work to be done. There is a sense from the returns that the Organisation is comfortable with its strategic corporate priorities and business objectives and that policies and procedures continue to be revised as necessary to adapt to external changes or internal gaps identified. Regular leadership meetings allow for an opportunity to disseminate and discuss corporate issues, progress, and future planning. However, it is acknowledged that further improvements need to be made in internal processes and monitoring, and the Organisation is making changes to various processes to strengthen the controls.

The biggest area of concern highlighted in the internal control checklists was the capacity of staff to deliver their workload in a way that enables us to remain fully compliant and manage our controls effectively. This will be a major priority for the coming year as we seek to address the challenges created by an inconsistent understanding of compliance requirements, and to create the time and space that our staff and managers need to undertake their compliance activities. Another major challenge for the coming year will be to improve the monitoring of our compliance and to enhance the early warning indicators available for compliance issues. To address this, we are currently reviewing our performance management information and exploring an enhanced consultancy function to complement Internal Audit.

A large proportion of NRW staff have been home-based due to the pandemic. Our ICT capability has served us well, with most staff having ready access to virtual meetings etc., and we have been able to continue to run the formal governance meetings throughout. Staff have been encouraged to complete the necessary safety training, familiarise themselves with the appropriate policies and complete the relevant e-learning packages. However, it has been noted that, due to changing priorities over the pandemic, some areas of the Organisation struggled to complete all e-learning and mandatory training, which should be a focus for the coming year.

There has been a significant improvement in the effectiveness of the risk management framework now being used more consistently across the organisation. Risks and mitigations are being effectively identified. Organisation-wide, risk management is now recognised and discussed more frequently and widely, including at Business Boards, and issues are escalated when appropriate to LTG, ET and the Board. However, there is still more work to be done to ensure NRW becomes a risk mature organisation. The focus for the coming year will be on improving consistency of risk scoring across the organisation and ensuring that there is appropriate escalation of risk to ensure challenge is undertaken at the right level.

Although Covid-19 has presented many challenges and a testing environment, the Organisation has been able to stay engaged with its staff and overcome a number of obstacles. By providing regular updates, frequent virtual team meetings, and written communications, we have been able to share information and example role-model behaviours across NRW and adapt our ways of engagement with employees. Wellbeing, health and safety remains a priority. However, we anticipate that the coming year will be extremely challenging, and we will continue to adapt and refine our assurance framework to ensure we are able to respond appropriately and have the necessary internal controls in place for the rapidly evolving environment.

Remuneration and Staff Report (audited)

Remuneration Report

Remuneration policy

The Board has established a People and Remuneration Committee to consider matters relating to the pay and conditions of employment of the most senior staff and overall pay strategy for all staff employed by NRW. The People and Remuneration Committee comprises four non-executive Board members. The Board Chair is an ex-officio member of the Committee.

The Chair and Board members’ remuneration is set by Welsh Ministers. The terms of contract for senior employees (Executive Team members) is based on NRW terms and conditions. The remuneration policy for the most senior staff is not subject to collective bargaining and the remuneration package is agreed by reference to a set of benchmark roles in the Welsh public service and to comparable organisations based in the UK.

There is a social partnership agreement in place with five trade unions and the setting of terms and conditions for staff below the Executive Team members is through collective agreement with the social partners. The Welsh Government approves any changes to pay, terms and conditions and gives a pay remit to NRW within which it must deliver. As part of this year’s pay offer we agreed, through formal consultation, a 1 year pay deal for the period 1 July 2020 to 30 June 2021 of 2.5%. This offer did not apply, as already agreed through Job Evaluation consultation, to those who had previously opted out of the Job Evaluation Scheme

Service contracts

All appointments to the Board are made on behalf of NRW’s sponsor minister in the Welsh Government.

The Chief Executive and Executive Team members are expected to be employed under permanent contracts. Appointments are made in accordance with our recruitment policy, which requires appointment to be made on merit and based on fair and open competition.

Unless otherwise stated below, the Executive Team members covered by this report hold appointments which are open-ended. These officers and Board members are required to provide three months’ notice of their intention to leave.

Salary and pension entitlements

The following sections provide details of the remuneration of members of the Board and the remuneration and pension interests of members of the Executive Team. Board members are not entitled to join the Civil Service Pension Scheme or receive other benefits. Early termination, other than for misconduct, would result in the Executive Team members receiving compensation consistent with the Civil Service Compensation Scheme. Board members are not entitled to compensation.

Board members’ remuneration

Board Member	Employment contract	Salary 2020/21 (£5,000 range)	Salary 2019/20 (£5,000 range)
Karen Balmer	9 November 2015 to 8 November 2022	10 to 15	10 to 15
Chris Blake	9 November 2015 to 24 February 2021	10 to 15	10 to 15
Catherine Brown	1 November 2018 to 31 October 2022	15 to 20	15 to 20
Julia Cherrett	1 November 2018 to 31 October 2025	10 to 15	10 to 15
Geraint Davies	1 January 2019 to 31 October 2024	10 to 15	10 to 15
Howard Davies	9 November 2015 to 31 August 2021	10 to 15	10 to 15
Elizabeth Haywood	9 November 2015 to 31 August 2021	10 to 15	10 to 15
Sir David Henshaw (Chair)	1 November 2018 to 31 October 2023	45 to 50	45 to 50
Zoë Henderson	9 November 2015 to 8 November 2022	15 to 20	15 to 20
Steve Ormerod (Deputy Chair)	1 November 2018 to 31 October 22	15 to 20	15 to 20
Rosie Plummer	1 November 18 to 31 October 24	10 to 15	10 to 15
Peter Rigby	1 November 18 to 31 October 23	10 to 15	10 to 15

 

• The terms of the Board members Julia Cherrett, Rosie Plummer and Peter Rigby have been extended.
• Chris Blake resigned as NRW board member with effect from 24 February 2021.
• Catherine Brown is chair of the Audit and Risk Assurance Committee (ARAC).
• Sir David Henshaw is chair of the Board.
• Zoë Henderson is chair of the People and Remuneration Committee (PaRC).
• Steve Ormerod is deputy chair of the Board.

Executive Team’s remuneration

Salary (£5,000 range)

Executive team member	2020/21	2019/20
Clare Pillman (Chief Executive)	140 to 145	140 to 145
Rachael Cunningham	65 to 70	0
Ceri Davies	105 to 110	105 to 110
Prys Davies	85 to 90	85 to 90
Kevin Ingram	5 to 10	95 to 100
Sarah Jennings	65 to 70	0
Tim Jones	0	50 to 55
Catherine Love	0	10 to 15
Gareth O'Shea	95 to 100	95 to 100
Niall Reynolds	0	5 to 10

 

• Kevin Ingram finished on 9 April 2020. His full year equivalent salary for 2020/21 was £95,000 to £100,000.
• Sarah Jennings was appointed as Executive Director of Communications, Customer and Commercial on 7 September 2020. Her full year equivalent salary for 2020/21 is £120,000 to £125,000.
• Tim Jones’ employment as director finished on 10 October 2019. His full year equivalent salary as director for 2019/20 was £90,000 to £95,000. He was employed again during 2020/21 under a new contract on a fixed term and was paid £5,000 to £10,000. The new contract was to provide incident and emergency support during the COVID-19 crisis. He did not have director responsibilities, nor received any pension benefits during 2020/21.
• Catherine Love finished on 31 May 2019. Her full year equivalent salary for 2019/20 was £75,000 to £80,000.
• Niall Reynolds’ employment as director finished on 30 April 2019. His full year equivalent salary as director for 2019/20 was £75,000 to £80,000. He opted out of the pension scheme with effect from 30 March 2019 so did not build up any pension benefits during 2019/20. He was employed again during 2020/21 under a new contract on a fixed term and was paid £5,000 to £10,000. The new contract was to provide incident and emergency support during the COVID-19 crisis. He did not have director responsibilities, nor received any pension benefits during 2020/21.

Benefits in kind (nearest £100)

Executive team member	2020/21	2019/20
Clare Pillman (Chief Executive)	0	0
Rachael Cunningham	0	0
Ceri Davies	0	0
Prys Davies	0	0
Kevin Ingram	0	0
Sarah Jennings	0	0
Tim Jones	0	0
Catherine Love	0	0
Gareth O'Shea	0	0
Niall Reynolds	0	0

Pension benefits (nearest £1,000)

The value of pension benefits accrued during the year is calculated as the real increase in pension multiplied by 20, plus the real increase in any lump sum, less contributions made by the individual. The real increases exclude increases due to inflation or any changes due to a transfer of pension rights. This value does not represent an amount that will be received by the individual. It is a calculation that is intended to convey to the reader of the accounts an estimation of the benefit that being a member of the pension scheme could provide. The pension benefit table provides further information on the pension benefits accruing to the individual.

Executive team member	2020/21	2019/20
Clare Pillman (Chief Executive)	49,000	112,000
Rachael Cunningham	71,000	0
Ceri Davies	62,000	33,000
Prys Davies	31,000	59,000
Kevin Ingram	16,000	36,000
Sarah Jennings	27,000	0
Tim Jones	0	7,000
Catherine Love	0	5,000
Gareth O'Shea	44,000	32,000
Niall Reynolds	0	0

 

• Clare Pillman received a pay award in 2019/20 which increased her accrued pension benefits as disclosed in the table above. The actual employer pension contribution was 30.3% of her salary.
• Rachael Cunningham was appointed as Executive Director of Finance and Corporate Services on 7 September 2020. Her full year equivalent salary for 2020/21 is £115,000 to £120,000. The pension benefits calculation has taken into consideration Rachael Cunningham’s change of employer during the year. The actual employer pension contribution was 30.3% of her salary.

Total (£5,000 range)

Executive team member	2020/21	2019/20
Clare Pillman (Chief Executive)	185 to 190	250 to 255
Rachael Cunningham	135 to 140	0
Ceri Davies	170 to 175	135 to 140
Prys Davies	115 to 120	140 to 145
Kevin Ingram	20 to 25	120 to 125
Sarah Jennings	95 to 100	0
Tim Jones	0	55 to 60
Catherine Love	0	15 to 60
Gareth O'Shea	140 to 145	125 to 130
Niall Reynolds	0	5 to 10

Salary

Salary covers both pensionable and non-pensionable amounts and includes gross salary, overtime and any allowances or payments that are subject to UK taxation. It does not include amounts which are a reimbursement of expenses directly incurred in the performance of an individual’s duties.

Performance-related pay

Movement between the pay points is subject to performance being assessed as ‘Outstanding’ by the Chief Executive and moderation by the People and Remuneration Committee.

Benefits in kind

The monetary value of benefits in kind covers any benefits provided by the employer and treated by the HM Revenue & Customs as a taxable emolument. None of the Board members or Executive Team received benefits in kind during 2020/21 and 2019/20.

None of the Board members or senior staff received any remuneration other than the amounts shown above.

Pension benefits

Executive Team member	Accrued Pension at pension age as at 31 March 2021 £000	Accrued Lump Sum at pension age as at 31 March 2021 £000	Real Increase in pension at pension age £000	Real Increase in Accrued Lump Sum at pension age £000	CETV at 31 March 2021 £000	CETV at 31 March 2020 £000	Real Increase in CETV £000
Clare Pillman (Chief Executive)	55 to 60	135 to 140	2.5 to 5	0	1,187	1,115	29
Rachael Cunningham (From 7 September 2020)	30 to 35	0	2.5 to 5	0	436	371	49
Ceri Davies	50 to 55	70 to 75	2.5 to 5	0 to 2.5	958	876	46
Prys Davies	25 to 30	50 to 55	0 to 2.5	0	459	425	15
Kevin Ingram (To 9 April 2020)	35 to 40	45 to 50	0 to 2.5	2 to 2.5	603	579	18
Sarah Jennings (From 7 September 2020)	0 to 5	0	0 to 2.5	0	21	0	16
Gareth O’Shea	50 to 55	80 to 85	2.5 to 5	0 to 2.5	912	849	27

 

Cash Equivalent Transfer Values

A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits they have accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

Real increase in CETV

This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation or contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

Compensation for loss of office

No compensation for loss of office was agreed during 2020/21.

Fair pay disclosure

NRW and similar bodies are required to disclose the relationship between the remuneration of the highest paid director in their organisation and the median remuneration of the organisation’s workforce. Total remuneration includes salary and benefits in kind where applicable. It does not include severance payments, employer pension contributions and the CETV.

In 2020/21, 6 contract staff (2019/20: 3) were charged at a rate in excess of the highest-paid director. The banded remuneration of the highest paid Director in the financial year 2020/21 was £140,000 to £145,000 (2019/20: £140,000 to £145,000). This was 4 times (2019/20: 4 times) the median remuneration of the workforce which was £35,288 (2019/20: £35,503). Staff pay scales range from £18,391 to £68,696. Directors’ remuneration is shown in the table above.

Staff report

This report provides information on the composition and costs of our workforce. Included in the staff tables below are directly employed staff (permanent employees, fixed-term appointments, apprentices) as well as other staff (agency, contractors, secondees).

Number of staff by headcount and full time equivalent (FTE) at 31 March 2021

Male employees

Employees	Headcount	FTE
All employees	1,366	1,338
Of which are Leadership Team	10	10
Of which are Executive Team	2	2

 

Female employees

Employees	Headcount	FTE
All employees	1,086	1,009
Of which are Leadership Team	13	12.5
Of which are Executive Team	4	4

 

Total

Employees	Headcount	FTE
All employees	2,452	2,347
Of which are Leadership Team	23	22.5
Of which are Executive Team	6	6

 

Number of staff by headcount and full time equivalent (FTE) at 31 March 2020

Male employees

Employees	Headcount	FTE
All employees	1,221	1,196
Of which are Leadership Team	11	11
Of which are Executive Team	3	3

 

Female employees

Employees	Headcount	FTE
All employees	966	896
Of which are Leadership Team	11	9
Of which are Executive Team	2	2

 

Total

Employees	Headcount	FTE
All employees	2,187	2,092
Of which are Leadership Team	22	20
Of which are Executive Team	5	5

 

Average number of full-time equivalent persons employed during the year was

Full-time equivalent persons employed	Permanent staff	Others	Total 2020/21	Total 2019/20
Directly employed	1,986	84	2,070	1,839
Agency and contract staff	0	161	161	168
Total	1,986	245	2,231	2,007

 

The average full-time equivalent number of staff employed on capital projects was: 237.1 (2019/20: 178.9).

Staff turnover

Staff turnover during 2020/21 was 3.79%.

Staff costs

Staff costs	Permanent staff 2020/21 £’000	Other staff 2020/21 £’000	Total 2020/21 £’000	Total 2019/20 £’000
Wages and salaries	70,812	16,526	87,338	77,605
Social security costs and other taxation	7,488	601	8,089	7,295
Other pension costs	13,344	556	13,900	21,267
Total net salary costs	19,644	17,683	109,327	106,167

 

Other expenditure for staff:

Other staff expenditure	Total 2020/21 £’000	Total 2019/20 £’000
Exit package costs	204	1,470
IAS 19 (pensions) service charge	9,191	12,513
Less early retirement pension costs	Negative 88	Negative 260
Less in-year LGPS pension contributions	Negative 1,948	Negative 11,699
Transfer to provision for Annual Compensation Payments	0	39
Movement in accrued holiday pay	942	Negative 59
Total other expenditure for staff	8,301	2,004
Less amounts charged to capital projects	Negative 11,130	Negative 7,919
Total net salary costs	109,327	106,167
Total staff costs	106,498	100,252

Details of the remuneration of Board members and directors are in the remuneration report. Bought-in services in Note 5 our financial statements and notes to the accounts (other expenditure) includes £10.3 million of expenditure on consultants (2019/20 £7.7 million).Details of NRW's pension obligations can be found in Note 14 of our financial statements and notes to the accounts.

Financial statements and notes to the accounts for 2020/21

Pension schemes

Natural Resources Wales is a member of two pension schemes. The Principal Civil Service Pension Scheme (PCSPS) is an open scheme and Natural Resources Wales is a closed member of the Environment Agency Pension Fund under a community admission agreement. Further details of these pension schemes are shown below.

Principal Civil Service Pension Scheme contributions

The PCSPS and the Civil Servant and Other Pension Scheme (CSOPS) - known as "Alpha" - are unfunded multi-employer defined benefit schemes, but the schemes do not identify individual organisations’ share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2016. You can find details in the resource accounts of the Cabinet Office: Civil Superannuation.

For 2020/21, employer’s contributions of £11,846k were payable to the PCSPS (2019/20: £9,472k) at one of four rates in the range 26.6% to 30.3% of pensionable earnings (for 2019/20 26.6% to 30.3%), based on salary bands. The Scheme Actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2020/21 to be paid when the member retires and not the benefits paid during this period to existing pensioners.

Stakeholder partnership pensions

Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employer’s contributions of £137k (2019/20: £97k) were paid to the appointed stakeholder pension provider. Employer contributions are age-related and range from 8% to 14.75%. Employers also match employee contributions of up to 3% of pensionable earnings. In addition, employer contributions of £5k, 0.5% of pensionable pay (2019/20 £4k), were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service or ill health retirement of these employees.

No contributions were due to the partnership pension providers at the balance sheet date, and no contributions were prepaid.

Local Government Pension Scheme contributions

Natural Resources Wales makes payments to the Environment Agency Pension Fund (EAPF), as the administering authority for the Local Government Pension Scheme (LGPS) via Capita, the pension fund administrators.

The LGPS is a funded, statutory, defined contribution public service pension scheme. Every three years the EAPF undertakes a valuation in conjunction with the Scheme Actuary. The 31 March 2019 valuation assessed the EAPF financial position with a funding level of 106% (2016: 103%). The main purpose of the actuarial valuation is to review the financial position of the fund and to set the level of future contributions for employers in the fund.

The UK Government introduced regulations in 2016 which require LGPS funds to pool investments to improve efficiency. Brunel Pension Partnership was created, comprising the EAPF and nine other LGPS funds, to meet this obligation.

Natural Resources Wales has a community admission agreement with the EAPF to participate in the LGPS, which was approved by the Secretary of State for Communities and Local Government in respect of former Environment Agency Wales staff who transferred to NRW on 1 April 2013. The liabilities for former members employed by the Environment Agency in respect of Welsh functions (pensions in payment and deferred members) also transferred. The Welsh Government has entered into a guarantee with the EAPF to indemnify them for any liabilities that arise from the participation of NRW in the EAPF.

For 2020/21 the employer's contribution rate was 23.08% (2019/20: 23.9%). In 2020/21 employer's contributions of £1,948k were paid to the LGPS (2019/20: £11,699k) which included an additional payment to reduce the balance on the IAS 19 pension fund. Additionally, £88k of early retirement strain costs were paid as part of exit packages.

Exit packages

The total number of exit packages by cost band:	2020/21	2019/20
Under £10,000	1	3
£10,001 to £25,000	3	7
£25,001 to £50,000	0	6
£50,001 to £100,000	2	15
£100,001 to £150,000	0	0
Total	6	31
Resource cost	£204,000	£1,470,000

 

There were no compulsory redundancies in 2020/21 or 2019/20.

Voluntary exit costs have been paid in accordance with provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. The table above shows the total cost of exit packages agreed and accounted for in 2020/21. Exit costs of £252k were actually paid in 2020/21, the year of departure. This amount includes £9k additional payments for 7 packages disclosed in 2019/20. Where NRW has agreed early retirements, the additional costs are met by NRW and not by the Civil Service pension scheme. Ill-health retirement costs are met by the pension scheme and are not included in the table.

Where the legacy bodies agreed early retirements, the costs were accounted for in full in the year in which they were agreed, and a provision made for future commitments. The annual compensation payments in respect of these are shown in Note 13 of financial statements and notes to the accounts (Provisions). 

Sickness absence (not subject to audit)

Our sickness absence rate for the rolling year (1 April 2020 to 31 March 2021) showed an average of 4.9 days lost per employee and equates to 2.2%.

Disability policies (not subject to audit)

Disability Confident Employer

On 26 April 2021, we successfully completed our self-assessment exercise and as a result, The Department for Work and Pensions has re-accredited NRW as a Disability Confident Employer until 22 April 2024.

‘Two Ticks’ guaranteed Interview Scheme

During the 2020 calendar year, we continued to be 100% compliant with our ‘Two Ticks’ guaranteed interview scheme where applicants who declare themselves as disabled, in line with the Equality Act 2010 definition, and meet the minimum criteria for the role applied for are automatically invited to interview.

Externally we received applications from 3,554 people of which 59 (1.66%) people requested a guaranteed interview. Internally we received applications from 312 people of which 4 (1.28%) people requested a guaranteed interview. 

Staff networks (not subject to audit)

Staff Networks are run by staff for staff and bring together people from all areas of the workplace who identify with others from a similar background or group. The Networks fulfil various functions, including providing opportunities for social interaction, peer support and personal development. They can also contribute to the development of our policies and working practices.

We recognise the value of self-organised groups in creating an environment that respects the diversity of staff and enables them to get the maximum benefit and enjoyment from their involvement in the workplace.

We aim to support these networks by:

• Encouraging managers to release employees to participate in them;
• Promoting the Networks to new and existing employees;
• Listening constructively to any employee concerns raised through the staff networks;
• Taking part in initiatives developed by the staff network.

We currently have 7 staff networks as follows:

• Assisted User Groups (ICT and Telephony)
• Calon LGBT+
• Christian Fellowship
• Cwtch (Carers Network)
• Dementia Friends
• Muslim Network
• Neurodiversity

Assisted User Group

We have an active Assisted User Group staff network which provides advice and opinion on both existing and new IT and telephony issues for members of staff that have reasonable adjustments made to their workspaces. We have found this group particularly useful due to their ability to test new initiatives such as accessibility to our externally hosted staff surveys. The network is key to ensuring our systems are usable by all staff and shares best practices with user group members and regularly user-tests newly proposed systems on behalf of the organisation.

Dementia Friends

Despite lockdown, over 140 staff have become new dementia friends in NRW between March and December 2020, with NRW running virtual sessions linked to both our new starter induction programme and our #TeamNRW staff webinars. All of our new starters attend a virtual dementia friend session during their first few months with us.

Two sessions have been run on Dementia Friends Awareness and a short session about NRW’s journey to becoming a Dementia Friendly Community, the resources that are available to staff and the expectations we have of them to be ‘Dementia Friendly’ in their work.

There are now 5 accredited NRW Dementia Champions who can deliver information sessions either face to face or using the new virtual format. Dementia Friends work continues to be represented at our Equality, Diversity and Inclusion Forum meetings and a ‘caring for elders’ virtual cuppa formed part of our recent Cwtch network week of events.

Other employee matters (not subject to audit)

During 2020/21 we finalised, in partnership with the Trade Unions, our new Enhancement and Payments policy.

Off-payroll engagements (not subject to audit)

NRW is required to publish information about appointments of consultants or staff that last longer than 6 months and where the individuals earn more than £245 per day, where we pay by invoice rather than through payroll. The off-payroll working rules were designed to ensure that if someone works through an intermediary and would have been regarded, for income tax and national insurance contributions purposes, as an employee if they were directly engaged by the client (NRW), they pay broadly the same income tax and national insurance contributions as if they were employed. These rules do not apply to people who are genuinely self-employed.

It is the responsibility of the client (NRW) to undertake the assessment for tax purposes as opposed to the intermediary. If the determination of the assessment is that the role is inside scope of IR35, the intermediary will pay the same employee tax as a pay‑rolled employee.

The following tables show our position in relation to these requirements.

Off-payroll engagements as of 31 March 2021, for more than £245 per day and that last for longer than six months

Number of existing engagements at 31 March 2021 that have existed for:	Number of contractors
less than one year	12
between one and two years	43
between two and three years	19
between three and four years	10
four or more years	20
Total	104

The majority of the contractors are supporting the Transformation team in developing and transforming our ICT systems.

New off-payroll engagements, or those that reached six months in duration, between 1 April 2020 and 31 March 2021, for more than £245 per day and that last for longer than six months

New engagements	Number of contractors
The number of new engagements, or those that reached six months in duration, between 1 April 2020 and 31 March 2021	104
Of which assessed as caught by IR35	0
Of which assessed as not caught by IR35	104
Of which engaged directly and are on the NRW payroll	0
Of which reassessed for consistency / assurance purposes during the year	88
Of which saw a change to IR35 status following the consistency review	0

 

Parliamentary and Audit Report (audited)

Losses and special payments

The Welsh Government's Managing Public Money rules require disclosure of losses and special payments by category, type and value where they exceed £300,000 in total and for any individual items of £300,000 or more.

Individual losses of £300,000 or more

There were no losses or special payments of £300k or more during 2020/21.

Losses and special payments by category

The table below provides the number of write offs and special payment requests approved in the year.

Category or type of loss	2020/21 Number	2020/21 £’000	2019/20 Number	2019/20 £’000
Write-off of irrecoverable debts	0	0	16	23
Loss of assets	15	18	14	294
Other losses (cash losses, fruitless payments, unenforceable claims, or gifts)	34	104	10	6
Special payments	5	17	2	2
Total	54	139	42	325

In addition to the above, there was a re-classification of capital expenditure which resulted in a reduction to intangible software development of £451k now being recognised as revenue expenditure, as described in note 5 in financial statements and notes to the accounts.

The Certificate and independent auditor’s report of the Auditor General for Wales to the Senedd

Opinion on financial statements

I certify that I have audited the financial statements of Natural Resources Wales for the year ended 31 March 2021 under paragraph 23 of the Schedule to the Natural Resources Body for Wales (Establishment) Order 2012. These comprise the Statement of Comprehensive Net Expenditure, Statement of Financial Position, Statement of Cash flows, Statement of Changes in Taxpayers Equity and related notes, including a summary of significant accounting policies. These financial statements have been prepared under the accounting policies set out within them. The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards as interpreted and adapted by HM Treasury’s Financial Reporting Manual. 

In my opinion the financial statements:

• give a true and fair view of the state of Natural Resources Wales’ affairs as at 31 March 2021 and of its net operating costs for the year then ended;
• have been properly prepared in accordance with international accounting standards as interpreted and adapted by HM Treasury’s Financial Reporting Manual; and
• have been properly prepared in accordance with Welsh Ministers’ directions issued under the Natural Resources Body for Wales (Establishment) Order 2012.

Opinion on regularity

In my opinion, in all material respects, the expenditure and income in the financial statements have been applied to the purposes intended by the Senedd and the financial transactions recorded in the financial statements conform to the authorities which govern them.

Basis of opinions

I conducted my audit in accordance with applicable law and International Standards on Auditing in the UK (ISAs (UK)) and Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I am independent of the body in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinions.

Conclusions relating to going concern

In auditing the financial statements, I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the body’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue.

My responsibilities and the responsibilities of the Accounting Officer with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and other parts of the report that are audited and my auditor’s report thereon. Legislation and directions issued to Natural Resources Wales do not specify the content and form of the other information to be presented with the financial statements. The Accounting Officer is responsible for the other information in the annual report. My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my report, I do not express any form of assurance conclusion thereon. My responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Report on other requirements

Opinion on other matters

As legislation and directions issued to Natural Resources Wales do not specify the content and form of the other information to be presented with the financial statements, I am not able to confirm that the Annual Report has been prepared in accordance with guidance.

In my opinion, based on the work undertaken in the course of my audit, the information given in the Annual Report is consistent with the financial statements.

Although there are no legislative requirements for a Remuneration Report, Natural Resources Wales has prepared such a report and, in my opinion, that part ordinarily required to be audited has been properly prepared in accordance with HM Treasury guidance.

Matters on which I report by exception

In the light of the knowledge and understanding of the body and its environment obtained in the course of the audit, I have not identified material misstatements in the Annual Report or the Governance Statement.

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• proper accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my team;
• the financial statements and the audited part of the Remuneration Report are not in agreement with the accounting records and returns;
• information specified by Welsh Ministers regarding remuneration and other transactions is not disclosed; or
• I have not received all of the information and explanations I require for my audit.

Responsibilities

Responsibilities of the Accounting Officer for the financial statements

As explained more fully in the Statement of Accounting Officer’s Responsibilities, the Accounting Officer is responsible for preparing the financial statements in accordance with the Natural Resources Body for Wales (Establishment) Order 2012  and Welsh Ministers’ directions made there under, for being satisfied that they give a true and fair view and for such internal control as the Accounting Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Accounting Officer is responsible for assessing the body’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless deemed inappropriate.

Auditor’s responsibilities for the audit of the financial statements

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.

My procedures included the following:

• Enquiring of management, and those charged with governance, including obtaining and reviewing supporting documentation relating to Natural Resources Wales’ policies and procedures concerned with:

• identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
• the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.

• Considering as an audit team how and where fraud might occur in the financial statements and any potential indicators of fraud.
• Obtaining an understanding of Natural Resources Wales’ framework of authority as well as other legal and regulatory frameworks that the Natural Resources Wales operates in, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of Natural Resources Wales.

In addition to the above, my procedures to respond to identified risks included the following:

• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and regulations discussed above;
• enquiring of management, the Audit and Risk Assurance Committee about actual and potential litigation and claims;
• reading minutes of meetings of those charged with governance and the Board;
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
• evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

I also communicated relevant identified laws and regulations and potential fraud risks to all audit team and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the Natural Resources Wales controls and the nature, timing and extent of the audit procedures performed.

A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website. This description forms part of my auditor’s report.

Responsibilities for regularity

The Accounting Officer is responsible for ensuring the regularity of financial transactions.

I obtain sufficient evidence to give reasonable assurance that the expenditure and income have been applied to the purposes intended by the Senedd and the financial transactions conform to the authorities which govern them.

Report

I have no observations to make on these financial statements.

Adrian Crompton
Auditor General for Wales
14 July 2021

24 Cathedral Road
Cardiff
CF11 9LJ

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