Participants in the company’s risk management and internal control system and distribution of roles among them

The composition of participants in the company’s risk management and internal control system, and distribution of roles relating to the organisation and maintenance of an effective internal control system among them are described below.

The Gazprom Neft Board of Directors, as part of its overall management of the company, carries out the following functions:

  • creating an appropriate control environment, introducing a culture of internal control, maintaining high ethical standards across all company levels;
  • defining principles and approaches to setting up and running the company’s risk management and internal control system;
  • undertaking analysis and evaluation of efficiency in setting up and running the company’s internal control system, including annual review of relevant issues and making recommendations for its improvement (if necessary). Information on the efficiency of the risk management and internal control system is provided to shareholders as part of the company’s Annual Report, and also as part of Gazprom Neft Internal Audit and Risk Management Directorate’s performance report;
  • control over the implementation of instructions and resolutions of the Board of Directors and shareholders by the company’s executive bodies;
  • control over the company’s compliance with laws of the Russian Federation, principles and recommendations of the company’s Code of Corporate Governance, and disclosure of complete and correct information about the company to its stakeholders;
  • approval of the Policy in Risk Management and Internal Control.

The Audit Committee performs functions designed to:

  • prepare recommendations for Gazprom Neft’s Board of Directors on the setting up, running, assessing performance and further improving the company’s risk management and internal control system, as well as on other matters within the remit of the Audit Committee (including preparing recommendations based on the board’s review of the Internal Control Policy);
  • undertake preliminary review of internal control issues;
  • carry out preliminary review of the Internal Control Policy (prior to its approval by the Board of Directors);
  • conduct analysis and assessment of the company’s internal control system effectiveness;
  • carry out analysis of the company’s financial statements and outcomes of external audit in terms of its compliance with Russian laws, international financial reporting standards (IFRS), Russian accounting standards (RAS), and other applicable legislation and regulations;
  • review identified or suspected facts of dishonest actions on the part of the company’s employees.

The company’s executive bodies and senior management perform functions designed to:

  • manage the establishment and efficient running of the risk management and internal control system by way of approving internal regulations on the scope and procedures for carrying out internal control procedures by the company’s business units in their areas of activity;
  • create the proper control environment, implement an internal control culture and maintain high ethical standards across all company levels, which ensures effective organisation and running of the internal control system;
  • distribute authority, duties and allocation of responsibility between heads of business units for the creation, implementation, maintaining, monitoring and further improvement of an efficient organisation and running of the company’s internal control system;
  • carry out regular assessment and training of the company’s employees in the field of internal control in connection with changes in internal and external conditions of the company’s operations.

Heads of business units and employees of the company perform functions designed to:

  • develop, document, implement, execute, monitor (self-assess) and further improve control procedures within their respective competencies and within their area of responsibility;
  • inform in a timely way their immediate supervisors about cases when the execution of control procedures became impossible for any reasons, and (or) a change in the organisation of control procedures is required due to changes in internal or external conditions of the company’s operations.

The Internal Audit Department as a part of the company’s Internal Audit and Risk Management Directorate performs the following functions:

  • independent and objective evaluation of the effectiveness of the organisation and running of the company’s internal control system based on a risk-oriented approach;
  • developing and monitoring the implementation of recommendations to eliminate shortcomings identified in the course of audits;
  • providing consultations and support of any interested party within the company regarding the organisation and running of the company’s internal control system; and
  • communicating results of assessments of the internal control system and suggestions for its improvement to the Audit Committee, the company’s executive bodies and, if necessary, to the business unit of Gazprom PJSC performing the internal audit function.

The Audit Commission

The Extraordinary General Meeting of Shareholders of 18 December 2020 approved a new version of the company’s Charter which no longer supports the continuation of the Audit Commission. To this end, Gazprom Neft PJSC’s Audit Commission was abolished with effect from 18 December 2020.

The Audit Commission was made up of the following members and operated from 11 June 2020 until 18 December 2020.

In 2020, the Audit Commission audited activities of Gazprom Neft in 2019. Based on this audit, an opinion was prepared and presented to shareholders as part of the materials for the annual General Meeting of Shareholders.

Remuneration to members of the Audit Commission was paid on the basis of a decision of the General Meeting of Shareholders. The annual remuneration paid to members of the Audit Commission in 2020 amounted to ₽4.52 million.

Name Role as at 18 December 2020
Margarita Mironova
Chairman of the Audit Commission
First deputy Head of the Management Committee Administration, Head of Department of the Management Committee Administration, Gazprom PJSC
Galina Delvig Head of Internal Audit and Risk Management Directorate, Gazprom Neft PJSC
Inna Tolstikova Chief Economist of the Department of the Management Committee Administration, Gazprom PJSC
Mikhail Veigel Head of Unit, Gazprom PJSC
Vadim Bikulov Deputy Head of Department, Head of Section of the Management Committee Administration Department, Gazprom PJSC

The Internal Audit Department as part of the Internal Audit and Risk Management Directorate

The company conducts internal audits to systematically and independently evaluate the reliability and effectiveness of corporate governance, as well as the risk management and internal control system.

Gazprom Neft’s Internal Audit and Risk Management Directorate reports functionally to the Board of Directors’ Audit Committee and reports directly to the company’s CEO.

The function of internal audit is carried out by the company’s Internal Audit Department forming part of the Internal Audit and Risk Management Directorate, and whose head is appointed by approval of the Board of Directors of Gazprom Neft PJSC.

The key objective of the Internal Audit Department within the Internal Audit and Risk Management Directorate is to provide the Board of Directors (through the Audit Committee) and company management (the CEO and the Management Board) with independent, objective, reasonable and substantiated guarantees and consultation aimed at improving the company’s operations. The Internal Audit Department contributes to the achievement of the company’s goals by using a systematic and consistent approach in evaluating and improving the effectiveness of corporate governance, risk management and internal control processes.

In order to perform its assigned tasks, the Internal Audit Department performs, among other things, the following key functions:

  • developing and submitting for approval to the Audit Committee the Internal Audit Department’s work plan, including the annual and forward audit plans;
  • organising and conducting in accordance with the established procedure internal audits and consultations in the company and across its entities, based on Russian and international best practices of internal audit;
  • independent and objective evaluation of the reliability and effectiveness of the organisation and running of the risk management, internal control and corporate governance systems in the company based on a risk-oriented approach;
  • communicating results of the assessment of internal control, risk management and corporate governance systems and proposals for their improvement to the Audit Committee and executive bodies of the company;
  • developing and submitting proposals on eliminating shortcomings and malpractices, their causes, as well as recommendations to the company management on improving the company’s operations;
  • providing consulting support to stakeholders within the company regarding organisation and running of the company’s internal control, risk management and corporate governance systems;
  • bringing in, within the limits of the approved budget of the Internal Audit Department (if necessary), independent external consultants and experts in accordance with the established procedure for providing internal audit services;
  • control over the completeness and timeliness of the implementation of measures designed to further improve the internal control system, corporate governance processes and risk management, developed on the results of audits;
  • collation, summary and analysis of information required to perform functions that are the responsibility of the Internal Audit Department, as well as following separate instructions from the company management;
  • organising and further improving the work of the Internal Audit Department on the basis of professional standards;
  • participating in the development, implementation and operation of automated management systems in the area of internal audit within the company, as well as coordination of their development across subsidiaries;
  • developing and implementing the Internal Audit Quality Assurance and Improvement Programme agreed upon by the Audit Committee;
  • developing recommendations to improve the company’s activities and eliminate shortcomings on the basis of audits, special inspections, investigations, and consultations, and communicating these to those people who can ensure that they are duly considered;
  • evaluating the effectiveness of anti-fraud and anti-corruption measures in the company;
  • organising the system for collecting and processing information on the signs and evidence of fraud and corruption: the hotline for countering fraud, corruption, and other violations of Gazprom Neft’s Corporate Code;
  • control over the completeness and timeliness of the execution of instructions from the company management based on the results of audits.

The Head of Internal Audit and Risk Management reports, on at least a semi-annual basis, to the Audit Committee and the Board of Directors on the results of the Internal Audit and Risk Management Directorate’s activities during the reporting period, and provides on a regular basis information as part of ongoing in-person and absentee meetings on other matters falling in the remit of the Audit Committee.

Throughout 2020, the Internal Audit Department completed all audit projects planned for the reporting period, both in the areas of corporate governance, information technology and investment activities, as well as across the company’s core production lines of business. As part of these projects, the Internal Audit Department focused on the analysis, identification and assessment of critical strategic areas in various areas of the company’s business.

In particular, internal audits focused on such production processes as planning, implementation and monitoring of well interventions; seismic surveys; oil transshipment and sea transportation; production and sales of petroleum products; and energy efficiency and reliability of process equipment at refineries.

In 2020, the Internal Audit Department also completed audits of cross-functional areas of the company’s operations, including those related to assessing the effectiveness of internal controls over processes in finance, information technology, industrial safety and Gazprom Neft’s investment activities.

In addition, the Internal Audit Department audited the company’s financial (accounting) statements as part of the activities of the company’s audit teams.

Taking into account recommendations of the Internal Audit Department, the company’s management has developed and is implementing a set of measures to improve the effectiveness of the business-processes internal control system and is updating the internal regulatory and methodological framework. In addition to performing audits, the focus of the Internal Audit Department’s attention was on developing consulting services aimed at further improving the company’s business.

Gazprom Neft’s Internal Audit and Risk Management Directorate is headed by Galina Delvig.

Shareholding (as at 31 December 2020)
none

Born in 1960.

Graduated from Plekhanov Moscow Institute of National Economy. Has headed the internal audit function in Gazprom Neft PJSC since 2008. She is a member of audit commissions in Gazpromneft-NNG, Gazpromneft-Aero, Slavneft, Gazpromneft Moscow Refinery, Tomskneft, Gazpromneft Omsk Refinery, FC Zenit.


External auditor

To verify and confirm the accuracy of its annual financial statements, the company engages on an annual basis a professional auditing organisation from among major international auditing companies that has no property ties with the company or its shareholders.

The basic principles for organising and conducting external audits, procedures and criteria for selecting auditors, and approaches to ensuring auditors’ compliance with principles of independence and absence of conflict of interest are set out in the Policy on the organisation and conduct of external audit in Gazprom Neft PJSC, its subsidiaries and affiliates.

The auditor is selected on the results of a competitive tender based on the evaluation of the following criteria:

  • qualifications and experience of the bidder in the subject matter, including experience in auditing companies of the oil and gas sector;
  • ensuring data protection and complying with requirements of credit agreements (including rating agencies);
  • financial parameters: cost of services, terms of payment;
  • independence: the auditor’s independence is not in breach if revenue per one client does not exceed 15% of the auditor’s total revenue (in accordance with the requirement of the Ministry of Finance of the Russian Federation, item 2.112 of «Rules of Independence of Auditors and Audit Organisations», and international requirements: clause 290.219 of IESBA Code of Ethics).

The company’s auditor is approved by the General Meeting of Shareholders on proposal of the Board of Directors. Preliminary assessment of candidates among auditing organisations is carried out by the Audit Committee.

In June 2020, the Annual General Meeting of Shareholders elected Financial and Accounting Consultants Limited Liability company (FBK LLC) as auditor for 2020.

During 2020, the Audit Committee made the following decisions relating to external audit:

  • to recommend to the Gazprom Neft Board of Directors that LLC FBK be nominated as a candidate for auditor of Gazprom Neft PJSC for 2020 to conduct an audit in accordance with Russian Accounting Standards (RAS) and in accordance with International Financial Reporting Standards (IFRS);
  • to recommend to the Gazprom Neft Board of Directors that the assessment of the auditor’s opinion on Gazprom Neft PJSC’s 2019 accounting (financial) statements prepared by FBK LLC be included in the materials to be presented to shareholders in preparation for Gazprom Neft’s Annual General Meeting of Shareholders;
  • to take note of information on the outcomes of the Gazprom Neft external auditor’s performance evaluation based on 2019 results;
  • to take note of information on approaches to conducting external audits and the plan and procedures for conducting the external audit of Gazprom Neft in 2020;
  • to recommend to the Gazprom Neft Board of Directors that the amount of remuneration to Gazprom Neft PJSC’s auditor, FBK LLC, in 2020 be ₽18,129,500 (excluding VAT);
  • to take note of information on the outcomes of implementing recommendations of Gazprom Neft PJSC’s external auditor for 2019;
  • to approve tender documentation for the conduct of a closed tender by Gazprom Neft for the selection of an audit organisation for 2021 to conduct a compulsory audit of Gazprom Neft’s accounting, financial and interim abridged financial statements during 2021;
  • to take note of information on the progress of the external audit of Gazprom Neft’s 2020 accounting (financial) statements (based on external auditor’s report).

Based on recommendations of the Audit Committee, the Board of Directors determined the fee for the audit of Gazprom Neft PJSC’s 2020 financial (accounting) statements in the amount of ₽18,129,500 (excluding VAT), including:

  • ₽8,003,000 (excluding VAT): services for audit of annual accounting (financial) statements prepared in accordance with the Russian Accounting Standards (RAS);
  • ₽10,126,500 (excluding VAT): services in relation to the audit of Gazprom Neft Group’s annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

FBK LLC does not provide bookkeeping or financial statement preparation advisory services to the company.