Internal Control System

Snam Rete Gas S.p.A adopted an internal control system several years ago which conforms to guidelines in the Code of Conduct for Listed Companies and to benchmark best practices. The system’s scope is to (i) check the adequacy of the different internal processes for efficiency, effectiveness and cost effectiveness; (ii) ensure the reliability and correctness of the accounting entries and protect the company’s assets; and (iii) ensure compliance of the operating procedures with internal and external regulations and company guidelines in order to guarantee a healthy and proper management system. The board of directors is responsible for the internal control system with the assistance of the audit committee. It sets the guidelines and periodically checks its adequacy and proper operation to ensure that the key business risks are identified and properly managed. The CEO checks that the guidelines drawn up by the board of directors are implemented by designing, managing and monitoring the internal controls. As required by the Code of Conduct for Listed Companies, the board of directors appointed the CEO as the executive director in charge of supervising the working of the internal control system in its meeting of 11 December 2008. The audit manager reports to the chairman in order to ensure independence from the operating activities subject to audit. He reports regularly to the chairman and CEO as well as to the audit committee and board of statutory auditors once every six months (unless circumstances require additional meetings). Management has primary responsibility for applying the internal controls as the control procedures form an integral part of its management duties. Therefore, management must ensure that the environment favours such controls and must perform the “line controls”, i.e. the controls performed by an individual operating unit or group company over its processes. The internal audit unit is in charge of checking the adequacy of the internal control system and that it can reasonably ensure that the company can attain its objectives cost-effectively and efficiently. Accordingly, the unit monitors the effectiveness of the controls in place, making recommendations and suggestions about remedial action to be taken to resolve weaknesses.