Annual report 2010 - Dexia.com

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAt Dexia SA level, the tasks performed by the Regulators in2010 related in particular to the following matters: ICAAP,Financial Products and Margin Calls.Moreover, regarding relations with the supervisory authoritiesand the corporate auditors, the audit departments ofsubsidiaries and branches of Dexia SA inform the auditdepartment of Dexia SA of planned meetings on the auditoperation, tasks performed by the prudential controlauthorities in their entities (throughout the task) and thematters deemed important arising from their regular meetingswith the corporate auditors and the supervisory authoritiesand submit the minutes. The audit management of Dexia SAmay attend these meetings when they so desire.Creation of an investigation and branchaudit unitOne of the guiding principles of the transformation of theaudit support line was the creation in 2010 of an Investigationand Branch Audit unit within Dexia SA, responsible forthe definition of transversal methodologies as well asinvestigations to be performed transversally (involving severalentities of the Dexia Group) and the periodical inspection ofthe branch network.The task of Investigations is, independently and objectively,to contribute to controlling the risks of fraud. Indeed the unitparticipated in the establishment of a governance structurefor the management of fraud risk. It intervenes in awarenessand fraud prevention activities. It takes measures for thedetection of fraud and deals with cases of fraud, and then itsuggests and monitors the remedy.The task of Branch Audit is, independently and objectively, togive Dexia an assurance as to the degree of control of risksassociated with activities in physical distribution channels.It systematically and methodically assesses the processes ofrisk management, control and governance in distributionchannels.Organisation and governanceIn terms of governance, the Investigation and Branch Auditunit is managed by the Group Head of Investigation andBranch Audit, reporting to the General Auditor of Dexia SA.It consists of:• an Investigation and Branch Audit unit reporting hierarchicallyand operationally to the Dexia SA audit department;• local Investigation and Branch Audit units reportinghierarchically to the audit departments of the entities butwhich nonetheless depend operationally on the Investigationand Branch Audit unit of Dexia SA.In order to manage and to steer the unit, it is coordinatedby a so-called Investigation and Branch Audit ExecutiveCommittee (IBAEC). On the basis of a fraud risk analysis, thiscommittee proposes the planning of joint activities, ensuresoptimum planning of transversal tasks, proposes necessarydevelopments in terms of the unit’s means, methodologyand tools, defines team training policy, analyses the results oftransversal tasks and validates activity reports. It also decideson the temporary placement of inspectors among entities.An Investigation and Branch Audit Charter sets out thefundamental principles governing the function, describing itsobjectives, roles, powers, duties and responsibilities, modesof operation and basic rules. This document assists in fixingobjectives for the unit and describes relations and conditionsof intervention by the Investigation and Branch Audit teamof Dexia SA vis-à-vis other entities of the Dexia Group takingaccount of the presence or not of local investigations teams.The Charter was presented to and approved by theManagement Board of Dexia SA in June 2010 and a meetingof the Internal Control, Risks and Compliance Committee inAugust 2010.Operational implementation of the Charter involves theconclusion of various service level agreements between DexiaSA and its subsidiaries. These agreements should be finalisedduring the first quarter 2011.Publication of the Investigation and Branch Audit Charterand its communication to employees of the Group will beorganised during the first half-year 2011. This will enableevery member of staff to understand the importance of thefunction in the internal control mechanisms and to assistmanagement of the Dexia Group.Activities in 2010Beyond the activities of elaborating and implementing theInvestigation Charter, the activity of the Dexia SA Investigationand Branch Audit Unit was aligned in 2010 to the followinglines:1. Actions involving awareness of fraud risk(s)On the request of the Operations and IT Systems support line,the Dexia SA team cooperated in the organisation of a FraudAwareness Workshop (presented by Deloitte) for the teams ofthat support line.2. The performance of tasksIn 2010 the Investigation and Branch Audit Unit was involvedin several tasks:• a transversal task, “Fleet Management”;• a joint task, performed in partnership between Dexia SAand Dexia Banque Internationale à Luxembourg, consistingof checking inter alia on advantages in kind, conflicts ofinterest, the operation of compliance functions and corporategovernance;• a task concerning assistance in the analysis of accountssuppliers and more precisely the exposure to financial riskassociated with double payments of supplier invoices;3. Inquiries and information to the judicial authoritiesIn 2010, 20 inquiries were made by the Investigation andBranch Audit department in Dexia SA. According to theclassification of fraud risks set out by the Basel II committee,the tasks performed or ongoing may be classified among thefollowing risk categories: internal fraud (12 tasks), externalfraud (4 tasks), clients, products and business practices (3tasks) and employment practices and workplace safety (1task).In addition to these inquiries, the team responded to severalrequests for information from entities and the judicialauthorities.56 Dexia Annual report 2010