Oversight

Internal Audit Commission

To ensure efficient oversight and audit of its financial and operating activities, INTECO established an Internal Audit Commission comprised of four members and engages an independent auditor.

The resolution of the sole shareholder of INTECO dated 18 May 2021 approved the following composition of the Internal Audit Commission:

Members of the Internal Audit Commission neither hold the Company’s shares, nor have kinship with members of the Company’s governing bodies or financial and operating oversight bodies, nor have been held liable for economic crimes, nor held positions at entities declared bankrupt.

Internal Control Department

To separate the functions of the second and third lines of defence, an Internal Control Department was created within the Internal Control Division, along with an Internal Audit Office functionally reporting to the Board of Directors.

The Internal Control Department is the second line of defence and performs the following functions:

• monitoring the implementation of risk management practices;
• analysing and consolidating risk-related information for the top management team;
• developing and updating local risk management regulations;
• providing methodological support to other business units;
• working out recommendations to members of governing bodies and heads of business units.

In 2021, the department made a significant contribution to the effectiveness of the Company’s internal control framework and cost optimisation. Its main areas of focus included:

• day-to-day oversight over procurement procedures;
• monitoring construction and installation at construction sites;
• carrying out audits of financial and operating activities, including those at construction sites;
• developing and maintaining the risk management framework with an emphasis on development project risks.

As part of its operating activities, the Department considered:

• over 450 iterations of procurement procedures related to the activities of INTECO and its subsidiaries and affiliates in the Moscow region (with recommendations provided for 64% iterations and over 80% of them taken on board by procurement initiators);
• over 200 iterations of procurement procedures related to the activities of INTECO’s subsidiaries and affiliates in Rostov-on-Don (with recommendations provided for 74% iterations and over 86% of them taken on board by procurement initiators).

These efforts contributed to greater transparency and effectiveness of the Company’s procurement system, risk mitigation and cost optimisation.

In addition, in 2021, the Internal Control Department carried out 23 checks, including verification measurements using land surveying equipment, lab tests of reinforced concrete structures, checks of construction and installation costs substantiation, and more. Over 60% of the checks were initiated by business units. After the consideration of conclusions and recommendations provided by the department, over 80% of the deficiencies were corrected.

Due to the consequences of the COVID-19 pandemic, the Company takes a stringent approach to the project development schedule. In addition to the measures mentioned above, the Internal Control Department procures that the construction and installation schedule is independently overseen, with monthly progress reports submitted to the Company’s collegiate governance bodies. In 2021, a methodology was developed to predict works completion timelines, construction and installation budget utilisation, and workforce needs over a 3–6 month period. The top management team was provided with recommendations on high-risk events.

As part of improving the risk management framework in 2021, the Internal Control Department worked out a risk management methodology, including the Development Project Risk Management rules. This came along with the automation and use of project risk reports in Рower BI-based Project Management System.

The risk map of development projects is now updated on a monthly basis, with new risks analysed, measures developed and their implementation monitored. Project risk reports are considered on a monthly basis by the collegiate body responsible for development project management.

Internal Audit Office

The Internal Audit Office provides the Board of Directors with impartial information on the effectiveness of risk management and the reliability of the internal control framework.

In 2021, the Internal Audit Office carried out audits to check whether INTECO’s policies are aligned with PJSC Bank TRUST’s policies (accounting, budget, investment, sales and procurement policies).

The internal audit covered the Company’s business process “Complex Interior Fit-out Works for Apartments and Public Spaces”.

Sadovye Kvartaly

West Garden

The Company’s regulations were developed in accordance with PJSC Bank TRUST’s requirements. The implementability of these policies was assessed as satisfactory.

In general, the state of the Company’s internal control framework was found to be good. At the same time, the audits identified room for improvement.

External audit

To ensure effective control and audit of financial and operating performance, the Company engages an independent Auditor. The Auditor is selected by the sole shareholder and approved by the Board of Directors.

Ernst & Young LLC77 Sadovnicheskaya Emb., Bld. 1, Moscow, 115035 has been approved as the external auditor of the Company’s IFRS statements for 2021.

FinExpertiza LLCOGRN 1027739127734, INN 7708096662, located at 47 Leningradsky Ave., Bld. 3, property X, floor 3, room 1, Moscow, 125167 was approved as the external auditor of the Company’s RAS statements for 2021.

FinExpertiza LLC is a member of SRO AAS (Self-Regulatory Organisation of Auditors Sodruzhestvo Association)included in the register on 24 January 2020, Principal Number of Registration Entry: 12006017998.