Lalaine De Jesus
3rd year BSA
MERALCO INTERNAL CONTROL
Internal Control
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities
over the company’s system of internal control. It is responsible for monitoring, overseeing, and
evaluating the duties and responsibilities of management, the internal audit activity, and the
external auditors as those duties and responsibilities relate to the organization’s processes for
controlling its operations.
The internal control framework of the company is embodied in the Management Control Policy.
This policy defines the roles and responsibilities of the Management, the Internal Audit, and the
Audit Committee relating to controls over the organization’s processes. It also describes the
responsibility for a system of checks and balances and emphasizes the importance of internal
control processes.
Management is charged with the responsibility for establishing a network of processes with the
objective of controlling the operations of the company in a manner which provides the Board of
Directors reasonable assurance that:

Data and information published either internally or externally is accurate, reliable, and
timely;

The actions of directors, officers, and employees are in compliance with the
organization’s policies, standards, plans and procedures, and all relevant laws and
regulations;

The organization’s resources are adequately protected against loss, fraud, misuse, and
damage;

Resources are acquired economically and employed profitably; quality business
processes and continuous improvement are emphasized; and

The organization’s plans, programs, goals, and objectives are achieved.
Internal control is an integral part of MERALCO’s governance system and risk management. It
is the responsibility of managers at all levels of the organization to:

Identify and evaluate the exposures to loss which relate to their particular sphere of
operations

Specify and establish policies, plans, operating standards, procedures, systems, and other
disciplines to be used to minimize, mitigate, and/or limit the risks associated with the
exposures identified.

Establish practical controlling processes that require and encourage officers and
employees to carry out their duties and responsibilities in a manner that achieves the
control objectives of the Organization

Maintain the effectiveness of the controlling processes that have been established and
foster continuous improvement to these processes.
Internal Auditor
The internal audit activities conform to the concepts and principles enunciated in the
definition of internal auditing as an independent, objective assurance and consulting activity
designed to add value and improve an organization’s operations. Internal audit services are
performed in accordance with the International Standards for the Professional Practice of Internal
Auditing.
The internal audit group is led by a chief audit executive and includes 23 other staff with
professional qualifications, which include Certified Internal Auditors, Certified Information
Systems Auditors and Certified Public Accountants. The tasks of the internal audit group are set
out in the Corporate Audit Charter and the Code of Corporate Governance of Meralco. To
provide for independence of the internal audit group, the chief audit executive reports
functionally to the AuditCom and administratively to the President and CEO in a manner
outlined
in
the
Corporate
Audit
Charter.
Ms. Helen T. de Guzman, the First Vice President and Chief Audit Executive of the
Manila Electric Company or MERALCO, heads our Corporate (Internal) Audits. Prior to her
internal audit posting, she has held other positions within the MERALCO group and other
companies as external auditor, accounting officer, finance and administrative officer,
comptroller, assistant general manager, treasury operations officer & assistant treasurer and
compliance
officer.
Ms. De Guzman is a Certified Internal Auditor, a Certified Public Accountant, an
Executive MBA degree holder from the Asian Institute of Management and a Fellow of the
Institute of Corporate Directors of the Philippines. She likewise belongs to the core group of
independent validators of the Institute of Internal Auditors Philippines or IIAP and a qualified
team leader for external quality assessment reviews. Annually, a risk-based internal audit plan is
prepared
and
approved
by
the
AuditCom.
The internal audit group issues reports to Senior Management and the Audit and Risk
Management Committee on the results of reviews and audits covering various operational units
of the Company and its subsidiaries including specific areas of concern identified by
Management. Significant concerns, which have been reported by the internal audit group, and the
implementation of responsive remedial measures, are monitored by Management and by the
AuditCom.
POLICIES AND PROGRAMS
Meralco upholds the highest standards of corporate governance through issuance of various
company policies and governance programs that are aligned with the Company’s vision, mission,
overall strategic directions, corporate objectives, and long-term goals. The Company believes
that well-defined policies should cascade governance principles to business operations and
processes to strengthen the brand of service excellence and ethical culture of its directors,
officers and employees of the Company.
Guided by the governance principles of Fairness, Accountability, Integrity, Transparency and
Honesty (FAITH), the Company has defined its governance framework through policies that
promote best corporate governance practices from the top management down to the ranks in a
manner that suits the distinct Meralco business environment. “Be Right” was introduced as the
Company’s governance slogan to remind the directors, management and employees to BEhave
RIGHT, observe the existing policies of the Company and report those who violate the same.
In line with the Company’s efforts to improve its governance atmosphere and pursuant to the
SEC Memorandum Circular No. 19, Series of 2016, otherwise known as the “Code of Corporate
Governance for Publicly Listed Companies,” the Board approved a Revised Manual of Corporate
Governance which was submitted to the SEC on April 24, 2017 which serves as the foundation
of all the Company’s governance policies.
Meralco’s Revised Manual of Corporate Governance embodies the principles and meets the
standards of governance set by the Philippine Securities and Exchange Commission (SEC). The
Manual adheres to the laws enfranchising the corporate existence and utility operations of the
company. It represents a firm commitment to a framework of corporate and governance rules and
principles that covers all aspects of our business. If any approach deviates from this Manual, it is
explained in the Compliance Officer's annual certification of compliance to the SEC.
Specific documents like the Code of Ethics, Code of Employee Discipline, Safety Code, Policy
on Subsidiary Management, Policy on Conflict of Interest and Guidelines on Board Committees,
among others, were also developed and are being implemented in support of the principles
embodied in the Revised Manual of Corporate Governance. The policies, rules and principles
contained herein are built on Meralco's own standards and experience while respecting the
benchmarks set in the SEC.
These policies are available at the Corporate Governance HR Express Portal of Meralco and
copies of the Corporate Governance Handbook, which compiles the above-mentioned policies,
were distributed to all offices.
As the corporate governance landscape changes, new policies are developed and existing ones
are constantly being reviewed and improved. Among the new policies issued in 2017 is the
Board Diversity Policy which was approved by the Board of Directors on December 18, 2017 in
accordance with the Revised Manual of Corporate Governance and pursuant to the
recommendations from the ASEAN Corporate Governance Scorecard and the SEC’s Code of
Corporate Governance for Publicly-listed Companies.
The Board Diversity Policy was issued to ensure that the Board has an appropriate mix of
expertise, experience, independence, and skills that would encourage critical discussion and
promote a balanced decision in the attainment of the Company’s strategic objectives and
sustainable development. This is also in line with the Company’s recognition of the important
role of women with appropriate and relevant expertise and experience that can contribute to the
diversity of perspectives in the Board.
As it strives to adapt with the changing conditions and as it formulates and improve policies and
strategies to pursue sustainable development, the Company is determined to keep corporate
governance the core of all its business decisions.