Accountability report 2021/22

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

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 external auditor.

Corporate governance report

Directors’ report

The Chief Executive is supported by a team of Executive Directors who together form our Executive Team (ET). There have been no changes to the Executive Team during 2021/22.

Name	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 & Corporate Services	Rachael Cunningham	7 September 2020 to present
Executive Director of Operations	Gareth O’Shea	27 April 2015 to present
Executive 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 2022 is included here.

Name	Position	Interest	Individual	Role
Clare Pillman	Chief Executive	Resident in an area that may be considered for the proposed new National Park	Not applicable	Not applicable
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	Executive 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	No interests to declare	No interests to declare	No interests to declare
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.

Clare Pillman, Chief Executive and Accounting Officer - 13 July 2022

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 2021/22 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 13 remunerated Board members, led by our Chair, Sir David Henshaw, with 11 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 were five changes to our Board this year: the terms of Dr Elizabeth Haywood and Mr Howard Davies ended on the 31 August 2021; Professor Calvin Jones, Mr Mark McKenna, and Mr Paul Griffiths were appointed as non-executive Directors from 1 September 2021.

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 non-executive 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.

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
Catherine Brown	1	1 November 2018	31 October 2022
Julia Cherrett	2	1 November 2018	31 October 2025
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
Professor Peter Rigby	2	1 November 2018	31 October 2023
Professor Calvin Jones	1	1 September 2021	31 August 2022
Mark McKenna	1	1 September 2021	31 August 2022
Paul Griffiths	1	1 September 2021	25 May 2022
Dr Rosie Plummer	2	1 November 2018	31 October 2024
Geraint Davies	1	1 January 2019	31 October 2024

The end dates reported in the above table were correct at the reporting date but discussions are ongoing to extend the contracts of some board members due to exceptional circumstances that have led to a small delay in the appointment of new Board members in 2022.

Board meetings

We held six two-day meetings; two were held face to face and four were held virtually due to Covid-19 restrictions. 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 the Covid-19 pandemic. Due to lockdown restrictions we have been limited in our opportunities to meet in public, and members of the public are able 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. External engagement is one of the elements of our work that has been most affected, leading to some delays in our engagement and training programmes.

Board member attendance 2021/22

Name	Meeting attendance
Sir David Henshaw (Chair)	6 out of 6
Professor Steve Ormerod	6 out of 6
Karen Balmer	5 out of 6
Catherine Brown	5 out of 6
Julia Cherrett	5 out of 6
Geraint Davies	6 out of 6
Howard Davies	2 out of 2
Dr Elizabeth Haywood	2 out of 2
Zoe Henderson	6 out of 6
Professor Calvin Jones	3 out of 4
Mark McKenna	4 out of 4
Paul Griffiths	4 out of 4
Dr Rosie Plummer	5 out of 6
Professor Peter Rigby	6 out of 6
Clare Pilman (Chief Executive)	6 out of 6

Audit and Risk Assurance Committee (ARAC)

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 2021/22
• Annual Report and Accounts 2020/21 and plans for this report, 2021/22
• Fraud / Counter Fraud revised operating model

Board member ARAC attendance 2021/22

Name	Number of meetings	Number of full meetings attended
Catherine Brown (Chair)	6	6
Karen Balmer	6	6
Dr Rosie Plummer	6	6
Professor Peter Rigby	6	4

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
• People Strategy
• Renewal Programme

Board member PaRC attendance 2021/22

Name	Number of meetings	Number of full meetings attended
Zoe Henderson (Chair)	4	4
Karen Balmer	4	4
Howard Davies	1	1
Julia Cherrett	4	4
Mark McKenna	2	2

Finance Committee

The Finance 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. 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
• Financial and Business Planning for 2022/23
• Strategic Review of Charging
• Timber sales and marketing oversight
• NRW’s Baseline exercise
• Grants strategy

Board member Finance Committee attendance 2021/22

Name	Number of meetings	Number of full meetings attended
Sir David Henshaw (Interim Chair)	8	8
Julia Cherrett	8	8
Dr Elizabeth Haywood (to August 2021)	4	3
Zoe Henderson (from April to December 2021)	5	5
Paul Griffiths (from December 2021)	3	3
Professor Calvin Jones (from December 2021)	3	3
Dr Rosie Plummer	8	8

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 2021/22

Name	Number of meetings	Number of full meetings attended
Howard Davies (Chair, to August 2021)	1	1
Dr Rosie Plummer (Chair, from August 2021)	3	3
Geraint Davies	3	3
Dr Elizabeth Haywood (to August 2021)	1	1
Professor Steve Ormerod	3	3
Mark McKenna (from October 2021)	2	2

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.

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
• oversight of the flood recovery and review implementation programme
• skills and succession planning
• oversight of work to improve NRW’s regulation of reservoir safety

Board member FRMC attendance 2021/22

Name	Number of meetings	Number of full meetings attended
Dr Elizabeth Haywood (Chair, to August 2021)	3	3
Julia Cherrett (Chair, from September 2021)	5	5
Karen Balmer (from April to August 2021)	3	3
Geraint Davies	5	4
Paul Griffiths	2	2
Professor Calvin Jones	2	2

Evidence Advisory Committee

The Evidence Advisory Committee (EAC) is advisory and provides 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.

EAC reviewed areas including the launch of NRW’s State of Natural Resources Report, NRW’s role as the designator for a proposed new National Park and the evidence-based views that would require discussion at EAC, and received presentations demonstrating the Wales Environmental Portal and its educational benefits and regarding the multi-capitals approach to achieving transformative change.

Board member EAC attendance 2021/22

Name	Number of meetings	Number of full meetings attended
Professor Peter Rigby (Chair)	3	3
Professor Steve Ormerod	3	3

Board Member reviews

The Chair carries out annual appraisals with each Non-Executive Director and the Chief Executive, and the review process includes a short self-assessment and priorities for the next year. The Chief Executive undertakes mid- and end-year appraisals with the five Executive Directors.

Our Executive

Day-to-day management of our organisation is delivered through the ET, comprising myself as Chief Executive and five Executive 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, review and scrutinise 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 which outlines the steps we will take towards meeting our Well-being Objectives in the Corporate Plan. Following Welsh Government agreement, the current Corporate Plan (2017-22) has been rolled forward to 2023.

The 2021-22 business plan is set out across five strategic priorities and is a one year ‘chunk’ of the Corporate Plan. Progress against these priorities is monitored on a quarterly basis using a performance dashboard of measures, which are scrutinised by our Business Boards, Executive Directors and NRW Board before being published on our website. Detailed management information is reviewed monthly at Leadership Team Group meetings and from Q3 in 21-22, this is also reported quarterly to Executive Directors and NRW Board, alongside the performance dashboard.

Throughout 2021-22 we faced the continuation of the public health crisis, with the impacts likely to be felt across the globe now and over the longer-term. As with much of the rest of the public sector in Wales, we have had to significantly re-engineer the way we work as we emerged from restrictions and we continue to review our Business Continuity Plans to ensure cover is in place for key individuals and multiple absences. During the year we have maintained our focus on the well-being, health and safety of our staff, partners and customers and will continue to do so as we learn from this challenging time and plan how we will work in the future.

Nevertheless, 2021/22 has put in place some key building blocks for global action – with new evidence presented by the UN IPBES reports, international agreements at COP26 in Glasgow and preparations for COP15 in Kunming in April /May 2022.Within Wales, the political context shifted with the new Programme for Government (PfG) published in June, followed by the Co-operation Agreement with Plaid Cymru in December 2021. Both emphasised a very strong commitment to the nature and climate emergencies with a clear recognition of the importance of practical and innovative action.

In response to Welsh Government’s ambition, as well as the ongoing budgetary pressures across the public sector, we have worked with Ministers and officials throughout 2021/22 to build a common understanding of our resources, priorities and the appetite and opportunity for doing things differently.

As a category 1 responder under the Civil Contingencies Act (2004) we have continued to respond to incidents within our remint in a professional and effective way. We have managed our response to the Covid pandemic through our incident management procedures and utilised our established Strategic Incident Response Group, Tactical Incident Response Group, and various supporting technical cells to ensure we continue to guide and steer our staff to ensure they work in a Covid safe way. We have also responded to flooding, storms, and other environmental incidents that have occurred throughout the year. Through a consultation process, we have recently secured a contractual change to the contracts of approximately 1200 staff from around the organisation to help and support our incident rotas, to ensure we are more resilient to respond to incidents when they occur now and in the future.

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 are both reviewed regularly. 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 of our Governance framework. It assists us in managing our business, protecting our resources and our reputation. We adopted an improved risk management framework in 2020 and since then we have continued to embed that framework, with significant improvements in the management and reporting of risks.

Responsibilities in relation to the management of risk are clearly outlined in our risk management framework. Each risk has an Executive-level Risk Owner and a Leadership or Management-level Risk Manager who meet regularly with the Action Owners for their risks to discuss causes, events, consequences, scores, controls, and planned actions. In addition, each of the Strategic Risks is subject to a regular deep dive at Executive Team (ET) meetings and each one has been assigned for additional scrutiny via a deep dive at the relevant Board Committee.

Risk is a standing item at all Audit and Risk Assurance Committee (ARAC) meetings and all committees undertake a deep dive of the risks allocated to them, reporting the results of each deep dive to ARAC.

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 all our strategic risks and conducts an annual review of our strategic risks and our risk appetite. Risk appetite statements will be written for any new strategic risks identified once the risk has been fully developed.

Our risk management framework sets out how and when risks should be escalated and we have seen many examples of this in practice throughout the year. We initially identified and continue to monitor the additional potential consequences of the Covid pandemic on our risks and the actions needed to mitigate against those impacts.

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 bi-annual online learning courses for staff on General Data Protection Regulation (GDPR), Computer Security in the Workplace and Information Security to ensure everyone is aware and up to date on how we manage the information we receive and hold. Completion rates of mandatory online learning have improved due to a new focused approach and increased monitoring, but we will continue to supplement this learning with targeted awareness and engagement. We have also collaborated with strategic partners such as Welsh Government, Data protection Community, local resilience fora and the National Cyber Security Centre to share learning and maintain standards.

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 tot he Information Commissioner's Office (ICO)

Year	Number of cases
2021/22	0
2020/21	0
2019/20	0

Declaration of interest

Our Conflict of Interest policy and guidance support 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. An Internal Audit review in 2020/21 highlighted that significant improvements were required to our Conflict of Interest policy, procedures, training, and reporting mechanisms, and this work was concluded 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. In 2020, 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.

Of the 4 cases reported during 2021/22: one was reported to another Prescribed Person in relation to NRW; two were reported internally in relation to NRW; and 1 was reported to NRW, as a Prescribed Person, in relation to another organisation.

Number of whistleblowing cases reported

Year	Number of cases
2021/22	4
2020/21	0
2019/20	2

Fraud

The Counter Fraud Strategy 2022 – 2026 sets out a new strategic direction designed to support and strengthen NRW’s ability to protect itself from the harm that fraud can cause. Focusing this strategy on best practices and professional standards will help ensure that an anti-fraud approach becomes integral to the way we work. Our Counter Fraud Strategy is supported by a Counter Fraud, Bribery and Corruption Policy and a Fraud, Bribery, and Corruption Response Procedure. Mandatory annual online learning courses are provided for staff on Anti-Fraud and Anti-Bribery and Corruption. These courses are designed to help staff identify red flags and ensure they are aware of their professional responsibilities. The completion rates for this mandatory training improved significantly in 2021. However, we are aware that completion rates for compulsory online learning are not currently at 100%. In 2022 we will refocus efforts on improving the completion rates in line with our revised Counter Fraud Strategy and Delivery Plan.

Completion stats for 2021

Learning courses	Completed/passed	Incomplete
Anti-Bribery and corruption (annually)	96.6%	3.4%
Anti-fraud (annually)	94.8%	5.2%

We have received 8 allegations of fraud, handled per NRW’s anti-fraud, bribery, and corruption process. These are reported to our Audit and Risk Assurance Committee. All investigations have been managed 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

Year	Allegations
2021/22	8
2020/21	10
2019/20	7

We recognise that many people are feeling financial pressures just now. With inflation hitting 7% and unprecedented increases in fuel and domestic energy costs, the cost of living crisis feels very real. Public sector bodies have seen a rise in internal frauds, including time management fraud cases. In response, we are advised to be more vigilant.

Whilst robust counter fraud arrangements are part of the NRW response, we also have a responsibility to support our employees and their families. Accordingly, colleagues in People Services are working on a range of initiatives to support anyone struggling financially and offer help where we can.

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

The annual audit opinion is informed in part by the delivery of the Internal Audit plan. This year we provided an “unacceptable assurance” for one audit area, Workforce Planning and “limited assurance” over two other audit areas: Whistleblowing and Key Stakeholder Engagement across the whole organisation.

The audit of workforce planning identified that NRW does not have an effective approach to workforce planning. However, it is acknowledged that the lack of effective workforce planning is a long-term strategic risk for NRW and that the organisation is at the start of the maturity journey towards developing a workforce plan. The audit also identified governance issues in terms of reporting, challenge and oversight. NRW has a current risk due to significant issues in relation to recruitment and resourcing difficulties within NRW. These issues have been recognised through the escalation of a resourcing risk to the Strategic Risk Register. The Follow Up of Recruitment Internal Audit (original audit reported in May 2020) made a recommendation to address the recruitment risks identified. It is also noted that multiple audits in 2021/22 have highlighted issues with internal staff training and development, which was also a major non-conformity in the 2022 attainment of the Health and Safety BSI ISO45001 accreditation.

NRW has not embraced organisation wide stakeholder engagement as it has not been integrated into governance, structure or relevant decision-making processes. This is driven by a lack of strategic direction and ownership of all stakeholder groups, there is no up-to-date strategic plan providing a holistic approach to stakeholder engagement for the organisation and an absence of stakeholder group-specific strategies or plans, therefore inhibiting actions being taken to identify and manage strategic stakeholders to ensure the achievement of the corporate objectives across all areas of the organisation.

The key stakeholder engagement audit did however note that the Customer stakeholder group is more established in comparison to other identified stakeholder groups. The Customer stakeholder group has developed a customer specific strategy and have plans in place for customer journey mapping. Further to this, the Customer Team have performed significant work to ‘data cleanse’ customer data for upload into a Customer Relationship Management (CRM) system, in preparation for a launch in mid-2022. Given the progress made by the Customer service Team and the clear strategy, identification and plans to manage stakeholders within this area of NRW we provided “moderate assurance” over the stakeholder engagement for this individual group of stakeholders.

The whistleblowing audit provided a limited assurance opinion largely due to a lack of an effective reporting mechanism and a poor understanding of whistleblowing across the organisation. The audit did not identify that there were instances of whistleblowing that had been mishandled. The volume of whistleblowing reported are notably low within NRW both internally and in its role as a Prescribed Organisation. Governance over reported whistleblowing’s was found to be robust, but there is a need to address awareness, update the policy and procedures to manage the risks that whistleblowing’s are not reported or are investigated inappropriately.

During the year we have also carried out 5 follow ups to assess the adequacy and assurance over the completion of audit actions from previous audits, where a limited assurance opinion was provided. A “good progress” opinion was provided for one of these, Management of Colliery Spoil Tips. A “reasonable progress” opinion was provided for three being: Timber Sales, Recruitment and Project & Programme Management. A “some progress” opinion was provided for the Reservoir Safety follow up.

It was identified in the year that management were not assessing actions against risks identified during the original audits and therefore actions were not establishing improvements in the design or effectiveness of controls. A revised reporting system for the completion of audit actions has improved this in the latter part of the year. The completion of the audit actions from the “limited assurance” opinion audits of Contract Management and Grants has been more robust and there is an expectation of an improvement in follow up outcomes in future years as a result.

The audit coverage also included: Timber Restocking & Establishment, Flood Report Progress Review, Alignment of Organisational Plans, Hand Arm Vibration, Corporate Performance Dashboard, Accounts Receivable, Fleet Management Compliance, Internal Drainage Districts, Waste Permits, Land Agency Function (Acquisitions & Disposals), Water Quality Sample Monitoring and Commercial Activities (Energy Delivery); all of which received “moderate” assurance.

The audits of the Fixed Asset Register, the Statutory & Legal Scheme, and Pensions all received a “substantial” assurance opinion. For the pensions audit we were able to use data analytics over the whole population which provided a high-level assurance over the calculations, deductions and reconciliations of pensions.

NRW has made considerable progress over the year to address the completion of audit actions. At the year-end there were 22 actions of which only 3 were a high priority that were overdue based on their target completion date. All these actions were being actively addressed by management with quarterly updates on progress provided to ARAC. Aging of these actions showed only 2 were from 2020, with the remaining actions all falling due within 2021.

NRW recognises 10 strategic risks, and it is noted that all risks are reported above the target risk core set for them with many still in the high-risk area close to the inherent risk score. The strategic risk register as of March 2022 recognised that the inherent risk for compliance (SR07) was 23 (major impact, almost certain likelihood) and that the current residual risk score was 21 (major impact, probable likelihood), showing no change from when it was reported in March 2021. This risk acknowledges that the causes of non-compliance relate to policies not being clear, up to date and well understood; poorly designed procedures/system; a culture that does not understand why compliance is important; and an ineffective second line.

NRW does have a framework for Risk Management, and they have built on the work reported last year, it is noted that the strategic risk register continues to be an embedded management tool and that the Leadership Team Group and Business Board Risk Registers are now being used to frame discussion at these levels regarding risks. It was good to note some dynamic risk discussions regarding the war in Ukraine and the impact on NRW which demonstrated an application of risk management reacting to changes in the external environment. However, there remains limited risk management below these levels, with a mixed approach being observed from the various functions.

Whilst risk reporting to ARAC has notably improved in the last few quarters of the year there is still limited oversight and aggregation being provided to enable the identification of possibly emerging risks or aggregated risks from lower-level risk registers. Based on the reported strategic risk register it could be assumed that NRW is not undertaking risk management actions to mitigate or manage the risks, as risk scores are reported as static over the year, however, this more reflects a cautious approach to risk reporting and a potential lack of understanding of the impact of risk mitigations on the residual score.

Whilst in 2020/21 NRW acknowledged the need to develop the three lines model into the internal control framework, the contract to commence this work was not awarded until March 2022 and so no improvements were made within the year. It is anticipated that learnings from this process can then be applied across NRW for other key processes to provide an improved internal control framework.

The Executive Team took steps in April 2022 after the year end to strengthen the internal governance arrangements with the approval of two key documents. The Governance Operating Model and the Delegated Authority. This strengthening of internal governance arrangements occurred after the year end and has therefore not impacted the internal audit opinion; however, they will move NRW into a stronger governance position for the forthcoming year once they are fully adopted and utilised.

NRW has throughout 2021/22 made considerable steps towards improving the internal controls, governance and risk management within the organisation, with good robust leadership being shown. Whilst the opinion remains limited, it is clearly moving steadily towards a moderate opinion. Given the further plans to address assurance mapping, the delivery of the transformation programme, governance improvements and an improved risk management approach, the foundations for improvement are considerable. Since this has been planned and developed within the year it has not affected the internal audit opinion, however if plans progress and the momentum to improve the culture for compliance continues an improved governance risk and control environment should become evident.

In conclusion, my professional evaluation of internal controls, governance and risk management has led me 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. I can therefore offer a limited overall assurance opinion for the past year. However, NRW has started to progress considerable work that if delivered as planned and to scope, provides an encouraging view for the forthcoming year.

External audit

Independent scrutiny forms an important source of 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), we continue 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. During 2021-22 we received £0.1m (£0.1 million in 2020-21) from a normal standing sales timber contract, which included the timber from a closed standing sales plus contract and was sold to the original customer through a single tender action.

Effectiveness of internal controls

To provide additional assurance that the framework of internal controls is in place and working well within NRW, members of ET and Chairs of Business Boards have each completed an Internal Controls Checklist and signed a Certificate of Assurance. This required them to make an evidence-based assessment of the effectiveness of the control framework in place for their Directorate/Business Board, attributing a grading of between substantial and unsatisfactory in terms of the assurance across each individual area.

This year we again achieved a 100% return rate of the checklists and certificates, with a varied level of detail between submissions. The options for assurance gradings have been changed this year and additional business areas have been included; therefore, it is not possible to make direct comparisons to 2020/21.

Business Boards and Directorates attributed similar levels of assurance across most areas, indicating that there is a commonality to the areas where assurance as to the effectiveness of internal controls is substantial, and where it is less satisfactory.

Overall, there is a sense from the returns that risks are captured, monitored, and managed well across the breadth of the organisation, and that further embedding risk management as a key priority within individual staff development plans would ensure further improvements. The returns also indicated that decisions taken across the organisation are in line with delegation levels and are evidence based, thorough, and subject to consultation as well as drawing on experts in the required fields.

There is a widely held sense again this year that the leadership of the organisation is visible, communicates regularly and has a focus on continuous improvement and professional development. Leaders at various levels of the organisation are said to role-model behaviours and encourage open discussion. There is a sense, however that there is more the organisation can do to support and encourage the development of new and upcoming team leaders and managers, including improving financial and other information provided to them. This has been identified as an area to focus on for the coming year.

Other areas of substantial assurance identified from the returns include ICT and Information Records management. It is indicated that generally systems are managed within the requisite policies and controls around access to systems are managed well. Additionally, the returns indicate a strong awareness of, and compliance with, data management requirements, quality management processes and, where relevant, learning lessons from any data-related incidents.

Some returns noted that there was some difficulty keeping guidance and other documents owned by Business Boards up to date, with a commitment to make this a priority for the coming year. There are certain activities identified for 2022/23 that will emphasise currency and ownership of policies as a key point of development.
Contract management was commonly identified as an area where staff felt they needed further training, support, and guidance. This is an area which will receive considerable attention in 2022/23 following the establishment of the contract management support service, as it continues to recruit to the team and fully achieve its objectives. The role of the contract management support service, in providing the organisation with assurance that contracts are being properly managed, needs to be developed throughout the year.

Workforce planning and succession planning issues were acute areas of concern for many. Although it was acknowledged that the issue has been compounded by the inability to recruit in certain areas of the business, this is cited as a serious concern. It does not feel that succession and workforce planning is taking place in a structured, strategic way, with some pockets of ad-hoc succession planning and local workforce planning taking place. Resourcing has been identified as an emerging risk of concern during 2021/22, and now sits on our Strategic Risk Register. It is also, therefore, subject to management at a strategic level within the organisation, and the results of this analysis will be fed into the risk register and the specific planned actions to mitigate it will need to ensure that they also address the concerns around workforce and succession planning.

There were several questions raised as to the role of Business Boards in the context of internal controls and assurance. Several areas were questioned as being outside of the scope of Business Boards for the purpose of this exercise, including monitoring Health and Safety, developing a workforce plan and monitoring compliance with key NRW policies and procedures. Some returns, particularly at Business Board level did not feel best placed to comment on the assurance of the effectiveness of some of these areas of control, due to the controls being owned by central and corporate functions.

The role of Business Boards in the context of internal controls and organisational governance will be reviewed over the coming year as part of our ongoing ‘vision for good governance’ development work. All of the comments received in relation to the process and content of the Internal Controls Checklist and Certificate of Assurance will be reviewed, and improvements built into the process for next year.

Clare Pillman, Chief Executive and Accounting Officer - 13 July 2022

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 by reference to the utilisation of the Job Evaluation for Senior Posts (JESP) and a spot salary.

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 pay deal for the period 1 July 2021 to 31 May 2022 of 2.0%. The Enhancements and Payments (excluding Loyalty Award) were also increased by 2% from 1 July 2021. 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	Contracted dates	Salary 2021/22 (£5,000 range)	Salary 2020/21 (£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	Not applicable	10 to 15
Catherine Brown	November 2018 to 31 October 2022	15 to 20	15 to 20
Julia Cherrett	1 November 2018 to 31 October 2025	15 to 20	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
Paul Griffiths	1 September 2021 to 25 May 2022	5 to 10	Not applicable
Elizabeth Haywood	9 November 2015 to 31 August 2021	15 to 20	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
Calvin Jones	1 September 2021 to 31 August 2022	5 to 10	Not applicable
Mark McKenna	1 September 2021 to 31 August 2022	5 to 10	Not applicable
Steve Ormerod (Deputy Chair)	November 2018 to 31 October 22	15 to 20	15 to 20
Rosie Plummer	1 November 18 to 31 October 24	15 to 20	10 to 15
Peter Rigby	1 November 18 to 31 October 23	25 to 30	10 to 15

Table notes:

• 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)
• Julia Cherrett has been chair of the Flood Risk Management Committee since 31 August 2021
• Howard Davies ceased to be a board member on 31 August 2021 and was chair of the Protected Areas Committee until this date. He received remuneration within the range of £5,000 to £10,000 for services during 2021/22 and a backpay for services as chair of Protected Areas Committee during previous financial years of £5,000 to £10,000. The total remuneration for the year was £10,000 to £15,000
• Paul Griffiths became a board member on 1 September 2021 and resigned on 25 May 2022
• Elizabeth Haywood ceased to be a board member on 31 August 2021 and was chair of the Flood Risk Management Committee until this date. She received remuneration within the range of £5,000 to £10,000 for services during 2021/22 and a backpay for services as chair of the Flood Risk Management Committee during previous financial years of £10,000 to £15,000. The total remuneration for the year was £15,000 to £20,000.
• Sir David Henshaw is chair of the Board and interim chair of the Finance Committee.
• Zoë Henderson is chair of the People and Remuneration Committee.
• Calvin Jones became a board member on 1 September 2021.
• Mark McKenna became a board member on 1 September 2021.
• Steve Ormerod is deputy chair of the Board.
• Rosie Plummer has been chair of the Protected Areas Committee since 31 August 2021.
• Peter Rigby is chair of Evidence Advisory Committee. He received remuneration within the range of £15,000 to £20,000 for services during 2021/22 and a backpay for services as chair of the Evidence Advisory Committee during previous financial years of £5,000 to £10,000. The total remuneration for the year was £25,000 to £30,000.

The end dates reported in the above table were correct at the reporting date but discussions are ongoing to extend the contracts of some board members due to exceptional circumstances that have led to a small delay in the appointment of new Board members in 2022

Executive Team’s remuneration 2021/22

Executive Team member	Salary (£5,000 range)	Benefits in kind (nearest £100)	Pension benefits (nearest £1,000)	Total (£5,000 range)
Clare Pillman (Chief Executive)	140 to 145	0	23,000	160 to 165
Rachael Cunningham	110 to 115	0	76,000	90 to 195
Ceri Davies	105 to 110	0	6,000	115 to 120
Prys Davies	110 to 115	0	26,000	135 to 140
Kevin Ingram	0	0	0	0
Sarah Jennings	120 to 125	0	47,000	95 to 100
Gareth O’Shea	120 to 125	0	93,000	215 to 220

Executive Team’s remuneration 2020/21

Executive Team member	Salary (£5,000 range)	Benefits in kind (nearest £100)	Pension benefits (nearest £1,000)	Total
Clare Pillman (Chief Executive)	140 to 145	0	49,000	185 to 190
Rachael Cunningham	65 to 70	0	71,000	135 to 140
Ceri Davies	105 to 110	0	62,000	170 to 175
Prys Davies	85 to 90	0	31,000	115 to 120
Kevin Ingram	5 to 10	0	16,000	20 to 25
Sarah Jennings	65 to 70	0	27,000	95 to 100
Gareth O’Shea	95 to 100	0	44,000	140 to 145

Executive team's remuneration notes:

• Clare Pillman is a final salary member (classic/classic plus/premium) who has transitioned to alpha. The final salary pension of a person in employment is calculated by reference to their pay and length of service. The pension will increase from one year to the next by virtue of any pay rise during the year. Where there is no or a small pay rise, the increase in pension due to extra service may not be sufficient to offset the inflation increase – that is, in real terms, the pension value can reduce, hence the reduced pension benefit value.
• 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.
• Ceri Davies’ full year equivalent salary was £105,000 - to £110,000 until December 2021 and £115,000 to £120,000 from January 2022 onwards.
• Prys Davies’ full year equivalent salary was £95,000 to £100,000. During the year, he received a back dated increase to salary which resulted in additional pay of £10,000 to £15,000 in relation to the previous financial year. Prys Davies is a final salary member (classic/classic plus/premium) who has transitioned to alpha. The final salary pension of a person in employment is calculated by reference to their pay and length of service. The pension will increase from one year to the next by virtue of any pay rise during the year. Where there is no or a small pay rise, the increase in pension due to extra service may not be sufficient to offset the inflation increase – that is, in real terms, the pension value can reduce, hence the reduced pension benefit value.
• Kevin Ingram’s employment 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.
• Gareth O’Shea’s full year equivalent salary was £105,000 to £110,000. During the year, he received a back dated increase to salary which resulted in additional pay of £15,000 to £20,000 in relation to financial years ended 31 March 2021 and 31 March 2020.
• 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.

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

Any increase in salary is subject to performance being assessed as either ‘Outstanding’ or ‘Achieving’ by the Chief Executive and moderation by the People and Remuneration Committee. The increase applied will be determined by the pay award applied for those within the collective bargaining unit. Where performance is deemed to be underperforming then no pay increase is applied.

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 2021/22 and 2020/21.

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 2022 £000	Accrued Lump Sum at pension age as at 31 Ma rch 2022 £000	Real Increase in pension at pension age £000	Real Increase in Accrued Lump Sum at pension age £000	CETV at 31 March 2022 £000	CETV at 31 March 2021 £000	Real Increase in CETV £000
Clare Pillman (Chief Executive)	60 to 65	135 to 14	0 to 2.5	0	1,261	1,187	3
Rachael Cunningham	35 to 40	0	2.5 to 5	0	513	436	48
Ceri Davies	50 to 55	70 to 75	0.2 to 5	0 to (2.5)	1,017	958	(4)
Prys Davies	30 to 35	60 to 65	0.2 to 5	0	549	509	9
Sarah Jennings	0 to 5	0	2.5 to 5	0	60	21	29
Gareth O’Shea	55 to 60	90 to 95	2.5 to 5	5 to 7.5	1,046	912	72

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 2021/22.

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 2021/22, 3 contract staff (2020/21: 6) were charged at a rate in excess of the highest-paid director. The banded remuneration of the highest paid director (as shown above) in the financial year 2021/22 was £140,000 to £145,000 (2020/21: £140,000 to £145,000). This was 3.8 times (2020/21 4 times) the median remuneration of the workforce, with comparison in respect of upper, median, and lower quartile remuneration as follows:

Workforce pay ratio

Workforce pay ratio	2021/22	2020/21	Movement (percentage)
Upper quartile £	42,885	42,044	2.0
Upper quartile ratio	3.3	3.3	n/a
Median £	37,119	35,288	5.2
Median ratio	3.8	4.0	n/a
Lower quartile £	31,490	30,873	2.0
Lower quartile ratio	4.4	4.5	n/a

Staff pay scales range from £19,100 to £70,070.

Staff report

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

Nifer y staff fesul pen a chyfwerth ag amser llawn fel ag yr oedd ar 31 Mawrth 2022

Gwryw

Employees	Headcount	FTE
All employees	1,364	1,331
Of which are Leadership Team	11	10
Of which are Executive Team	2	2

 

Benyw

Employees	Headcount	FTE
All employees	1,102	1,028
Of which are Leadership Team	14	12.5
Of which are Executive Team	4	4

 

Cyfanswm

Employees	Headcount	FTE
All employees	2,466	2,359
Of which are Leadership Team	25	23
Of which are Executive Team	6	6

 

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

Gwryw

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

 

Benyw

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

 

Cyfanswm

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

 

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

Full-time equivalent persons paid	Permanent staff	Others	Total 2021/22	Total 2020/21
Directly employed	2,072	72	2,144	2,070
Agency and contract staff	0	164	164	161
Total	2,072	236	2,308	2,231

 

The average full-time equivalent number of staff employed on capital projects was: 232.2 (2020/21: 237.1).

Staff turnover

Staff turnover during 2021/22 was 6.75% excluding temporary workers e.g. Agency (2020/21 3.79%).

Staff costs

Staff costs	Permanent staff 2021/22 £’000	Other staff 2021/22 £’000	Total 2021/22 £’000	Total 2020/21 £’000
Wages and salaries	78,250	14,873	93,123	87,338
Social security costs and other taxation	8,346	625	8,971	8,089
Other pension costs	19,804	611	20,415	13,900
Total net salary costs	106,400	16,109	122,509	109,327

 

Other expenditure for staff:

Other staff expenditure	Total 2021/22 £’000	Total 2020/21 £’000
Exit package costs	159	204
IAS 19 (pensions) service charge	16,353	9,191
Less early retirement pension costs	Negative 15	Negative 88
Less in-year LGPS pension contributions	Negative 6,894	Negative 1,948
Movement in accrued holiday pay	Negative 140	942
Total other expenditure for staff	9,463	8,301
Less amounts charged to capital projects	Negative 12,757	Negative 11,130
Total staff costs	119,215	106,498

Details of NRW's pension obligations can be found in Note 14 of our financial statements and notes to the accounts.

Details of the remuneration of Board members and directors are in the remuneration report. Bought-in services in Note 5 (other expenditure) includes £11.3 million of expenditure on consultants (2020/21 £10.3 million).

Pension schemes

Natural Resources Wales is a member of two pension schemes. The Principal Civil Service Pension Scheme (PCSPS) is an open scheme and includes both the defined benefit scheme, Alpha as well as the stakeholder partnership defined contribution scheme. Natural Resources Wales is also 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’s actuary valued the PCSPS as at 31 March 2016. You can find details in the resource accounts of the Cabinet Office: Civil Superannuation.

For 2021/22, employer’s contributions of £13,204k were payable to the PCSPS (2020/21: £11,846k) at one of four rates in the range 26.6% to 30.3% of pensionable earnings (for 2020/21 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 2021/22 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 £152k (2020/21: £137k) 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 (2020/21 £5k), 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.

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 2021/22 the employer's contribution rate was 24.67% from April 2021 and 23.76% from June 2021 (2020/21: 23.08%). In 2021/22 employer's contributions of £6,894k were paid to the LGPS (2020/21: £1,948k) which reduces the balance on the IAS 19 pension fund.

Exit packages

The total number of exit packages by cost band:	2021/22	2020/21
Under £10,000	2	1
£10,001 to £25,000	1	3
£25,001 to £50,000	0	0
£50,001 to £100,000	2	2
£100,001 to £150,000	0	0
Total	5	6
Resource cost	159,000	£204,000

There were no compulsory redundancies in 2021/22 or 2020/21.

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 2021/22. Exit costs of £226k were actually paid in 2021/22, the year of departure. This amount includes £7k additional payments for 3 packages disclosed in 2020/21. 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.

Sickness absence (not subject to audit)

Our sickness absence rate for the rolling year (1 April 2021 to 31 March 2022) showed an average of 5.9 days lost per employee and equates to 2.7%.

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 2021/22, 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 1629 people of which 28 (1.72%) people requested a guaranteed interview. Internally we received applications from 820 people of which 4 (0.48%) people requested a guaranteed interview.

Staff networks (not subject to audit)

The 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.

Staff Networks fulfil various functions including providing opportunities for social interaction, peer support and personal development. Staff networks can also contribute to the development of our policies and working practices.

As an organisation we value our 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 support the networks by:

• Encouraging managers to release employees to participate in meetings and targeted work arising
• 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
• Renewed Employers for Carers membership January 2022
• Renewing our Stonewall membership April 2022

We currently have 7 staff networks as follows:

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

In August 2021 our Calon LGBTQ+ Network met with Welsh Government PRISM Network to discuss their approach to WEI Stonewall submission and sharing good practice on best ways in engaging with staff. Calon hope to continue to collaborate with PRISM moving forward on campaigns.

One member from each Network attends the EDI Forum meetings, providing an update and a forward look on what the Network is involved with. Open conversations for constructive feedback are encouraged at meetings.

Each Network gives a presentation at the Induction course for new member of staff to help ensure staff are aware of our Networks and the support they can offer at an early stage in their career with us here.

Over the year an events calendar has been developed which helps in having a more coordinated approach to how our staff networks work, making it easier to work together to promote and raise awareness of events

Other employee matters (not subject to audit)

During 2020/21 we finalised, in partnership with the Trade Unions, the contractual arrangements for approximately 1200 roles to be on a rota.

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 2022, for more than £245 per day and last for longer than six months:

Number of existing engagements at 31 March 2022 that have existed for:	Number of contractors
less than one year	17
between one and two years	22
between two and three years	21
between three and four years	17
four or more years	19
Total	96

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 2021 and 31 March 2022, 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 2021 and 31 March 2022	24
Of which assessed as caught by IR35	0
Of which assessed as not caught by IR35	24
Of which engaged directly and are on the NRW payroll	0
Of which reassessed for consistency / assurance purposes during the year	8
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

During the year, a write off valued at £1,336k was recorded. The value of an intangible asset under construction relating to a software system for the laboratories was reduced by this amount due to the software supplier no longer being able to deliver under the contract. An independent review has been conducted so lessons can be learnt for future projects of this nature.

Natural Resources Wales also made a special payment relating to the reimbursement of fees of £687k to Horizon Nuclear Power following cessation of development activities at the Wylfa Newydd site.

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	2021/22 Number	2021/22 £'000	2020/21 Number	2020/21 £’000
Write-off of irrecoverable debts	45	114	0	0
Loss of assets	11	1,441	15	18
Other losses (cash losses, fruitless payments, unenforceable claims, or gifts)	20	9	34	104
Special payments	4	1,145	5	17
Total	80	2,709	54	139

Clare Pillman, Chief Executive and Accounting Officer - 13 July 2022

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 2022 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 UK adopted 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 2022 and of its net operating costs for the year then ended;
• have been properly prepared in accordance with UK adopted 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

24 Cathedral Road
Cardiff
CF11 9LJ

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