Welle Environmental Group Co.Ltd(300190) : internal control evaluation report in 2021

Welle Environmental Group Co.Ltd(300190)

Internal control evaluation report in 2021

Welle Environmental Group Co.Ltd(300190) all shareholders:

In order to strengthen and standardize internal control, improve the company's management level and risk control ability, and promote the long-term sustainable development of the company, according to the basic norms of enterprise internal control, guidelines for the application of enterprise internal control, guidelines for the evaluation of enterprise internal control, guidelines for the audit of enterprise internal control and other relevant documents, Combined with the internal control system and evaluation methods of Welle Environmental Group Co.Ltd(300190) (hereinafter referred to as "the company" or "the company"), the effectiveness of the company's internal control on December 31, 2021 (the benchmark date of internal control self-evaluation report) was evaluated.

1、 Important statement

It is the responsibility of the board of directors of the company to establish a sound internal control mechanism and effectively implement internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report in accordance with the provisions of the enterprise's internal control standard system. The board of supervisors shall supervise the establishment and implementation of internal control by the board of directors. The company's management is responsible for organizing and leading the daily operation of the enterprise's internal control. The board of directors, the board of supervisors and the directors, supervisors and senior managers of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this report, and bear individual and joint legal liabilities for the authenticity, accuracy and completeness of the contents of the report.

The objective of the company's internal control is to reasonably ensure the legal compliance of operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and level, and promote the company to realize its development strategy. Due to certain limitations of internal control, it can only provide reasonable guarantee for the realization of the above objectives. In addition, as changes in circumstances may lead to inappropriate internal control or reduced compliance with control policies and procedures, there is a certain risk to speculate the effectiveness of internal control in the future according to the internal control evaluation results.

2、 Internal control evaluation conclusion

According to the identification of major defects in the company's internal control over financial reporting, there are no major defects in the internal control over financial reporting on the benchmark date of the internal control evaluation report. The board of Directors believes that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise's internal control standard system and relevant regulations. According to the identification of major defects in the company's internal control over non-financial reports, the company found no major defects in the company's internal control over non-financial reports on the benchmark date of the internal control evaluation report. There are no factors affecting the evaluation conclusion of the effectiveness of internal control from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report.

3、 Internal control evaluation

(I) evaluation scope of internal control

1. Main units included in the scope of evaluation

According to the risk oriented principle, the company determines the main subsidiaries, businesses and matters and high-risk areas included in the evaluation scope. The main units included in the evaluation scope include the parent company and all subsidiaries within the scope of consolidated statements. The total assets of the units included in the evaluation scope account for 100% of the total assets in the company's consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue in the company's consolidated financial statements.

2. Main operations and matters included in the scope of evaluation

The main businesses and matters included in the evaluation scope include: corporate governance structure, organizational structure, human resources policies, corporate culture construction, fund management, financial management, internal control over subsidiary companies, internal control over connected transactions, internal control over major investments, internal control over information disclosure, etc.

(1) Corporate governance

In order to further clarify the responsibilities, authorities and operation procedures of the general meeting of shareholders, the board of directors, the board of supervisors and the general manager of the company, and standardize the corporate governance structure of the company, the company has established and improved the working system of the general meeting of shareholders, the board of directors, the board of supervisors, independent directors and the Secretary of the board of directors in strict accordance with the company law, the guidelines for the governance of listed companies and other laws and regulations and the articles of association, Rules of procedure have been formulated. At the same time, according to the revision of the company law, listing rules and other laws and regulations, the company timely revised the above systems of the company, continuously improved the internal control and management mechanism of the company, and promoted the sustainable and steady development of the company.

The board of directors is responsible for the daily operation and management of the company, while the board of shareholders and the board of supervisors supervise the daily operation and management of the board of directors and the decision-making of major matters of the company.

(2) Organizational structure of the company

In accordance with the requirements of the company law, the securities law, the guidelines for the governance of listed companies and other laws and regulations, the company has established a perfect organizational structure and set up decision-making supervision institutions such as the general meeting of shareholders, the board of directors and the board of supervisors. In the organizational structure of the company, the general meeting of shareholders is the highest authority of the company, which exercises the voting rights on major matters such as the company's business policy, investment, profit distribution, election and replacement of directors and supervisors, amendment of the articles of association and so on. The board of directors of the company consists of 9 directors, including 3 independent directors. Authorized by the general meeting of shareholders, the board of directors is fully responsible for the operation and management of the company and is responsible to the general meeting of shareholders. Under the board of directors, there are four special committees of the board of directors, including strategy committee, salary and assessment committee, nomination committee and audit committee, and formulate corresponding implementation rules of the special committee. The board of supervisors of the company is composed of three supervisors, including one employee supervisor. The board of supervisors is the supervisory organ of the company, which is responsible for and reports to the general meeting of shareholders. It is mainly responsible for supervising whether directors and senior managers violate laws and regulations and infringe on the interests of the company and shareholders when performing their duties, and supervising and inspecting the operation of the company.

According to its own production and operation characteristics and requirements, the company has established functional departments matching the management framework and system structure, clearly defined the main responsibilities of each department, and played a vital role in the company's business expansion, increasing benefits and ensuring safety. During the reporting period, the company established the group management center, and divided the water environment division and solid waste treatment division according to the business segment. The group management center has various functional departments such as the president's office, the audit department, the procurement management department, the financial management department, the chief engineer's Office, the industrial research center and the administrative management department. The group headquarters strengthened the management of the group's divisions and subsidiaries from the aspects of human resources, finance, market and procurement Control and coordination, fully mobilize the enthusiasm of group members, give full play to their business autonomy, and strengthen the strategic management and professional management and control ability of the headquarters.

(3) Internal audit

The company has a special audit department. Under the leadership of the audit committee of the board of directors, the audit department carries out work according to the relevant audit system of the company, audits and verifies the financial revenue and expenditure and production and operation activities of various departments and subsidiaries of the company, makes a reasonable evaluation of the authenticity, legitimacy and rationality of economic benefits, and supervises and inspects the internal control system and internal management of the company.

(4) Human resources policy

As a technologically advantageous enterprise, the company has always paid attention to human resources work and the introduction and training of talents. The company has formulated and implemented relatively perfect human resources management policies, formulated and improved management systems such as personnel management system, performance appraisal management system and staff training manual, which are responsible for the recruitment, training and guidance, salary assessment, promotion, reward and punishment of employees The procedures of dismissal and resignation are specified in detail and reasonably.

At the same time, the company actively provides employees with a diversified development platform to maximize the common growth of employees and enterprises.

(5) Enterprise culture construction

Based on its own characteristics and the vision of "building a beautiful home with green waters and mountains", the company takes "customer-oriented, honest and rigorous, continuous innovation, openness and win-win" as the core values of the company and "organic waste recycling expert" as the development orientation of the company, strives to expand the related fields of urban and rural organic waste recycling, and provides customers with environmental protection technology solutions, entrusted operation services Comprehensive and integrated professional services such as after-sales and value-added services strive to build the company into a well-known brand in China's environmental protection industry.

(6) Fund management

The company regards fund management, especially the management of raised funds, as the most important part of the company's internal control. The company has formulated the management system for the use of raised funds and other relevant systems, and established a perfect use approval and management system. The company also does a good job in fund management in strict accordance with relevant management systems. All monetary capital flows must be handled in accordance with the specified process and authorized approval, so as to ensure the safe, reasonable and efficient use of the company's funds.

(7) Financial management

The company has formulated the financial management system to monitor the use of funds and the operation of assets in various business departments of the company, so as to ensure the safety of the company's property. The financial management system regulates the company's financial behavior from the aspects of financial work management, asset management, liability management, shareholders' equity management, income and profit management, cost management, fund management and so on.

(8) Asset management

According to its actual situation, the asset management company combs the business processes such as asset acquisition, acceptance, use, preservation and disposal, defines the responsibilities, authorities and post separation requirements of all links of asset management business, and improves the specific rules and regulations such as asset acceptance, use and maintenance. Strengthen the protection of the rights and interests of intangible assets, and formulate the cost accounting, amortization and other methods of intangible assets in line with relevant standards to ensure the authenticity and reliability of the financial information of intangible assets. (9) Internal control of subsidiaries

The company has formulated and implemented the management system of subsidiary companies, standardized the management process of subsidiary companies, and defined the responsibilities of management personnel of subsidiary companies. At the same time, each subsidiary company has formulated and implemented a perfect internal control management system in accordance with the standards of listed companies and compared with the company's existing internal control management system, which is jointly supervised and implemented by the person in charge of the subsidiary company and the company's management. The company strengthened the management and control of each subsidiary company from the financial, procurement, human resources and other sectors, sent management personnel to it, and strive to control the human and financial resources of the group members and know the risks, so as to urge the operation of the subsidiary companies to comply with the laws and regulations.

(10) Internal control over related party transactions

The company has formulated the management system of connected transactions in combination with the articles of association and other relevant systems, strictly standardized the approval procedures of connected transactions, limited the approval authority of the general meeting of shareholders and the board of directors on connected transactions, and strengthened the supervision of independent directors and the board of supervisors on the approval and implementation of connected persons, connected relationships and connected transactions. At the same time, the company also formulated the system of regulating capital exchanges with related parties, established a long-term mechanism to prevent controlling shareholders and related parties from occupying the company's funds, and further improved the company's internal control.

(11) Guarantee business

The company has formulated and implemented the external guarantee management system, defined the review procedures of external guarantees, stipulated the approval authority and approval process of the general meeting of shareholders and the board of directors on external guarantees, standardized the management and information disclosure of external guarantees, promoted the benefits and controlled the risks of the company and its subsidiaries in the process of organizing resources, assets, investment and other business operations, and ensured the safety and profitability of capital operation, To improve the profitability and anti risk ability of the company. During the reporting period, the company's guarantees were for holding or participating subsidiaries, and there were no other external guarantees.

(12) Internal control of major investment

In order to promote the benefits and control the risks of the company and its subsidiaries in the process of organizing resources, assets, investment and other operations, and ensure the safety and profitability of capital operation, the company has formulated the management system for foreign investment in accordance with relevant laws and regulations, which has made detailed provisions on the approval authority, organization and decision-making mechanism of the company's foreign investment. The company has passed the general meeting of shareholders, the board of directors The investment decision-making committee and other relevant institutions shall comprehensively evaluate the risk, income, cost and other important factors, further strengthen the company's foreign investment management, ensure the preservation and appreciation of the company's foreign investment, and maintain the overall image of the company and the interests of investors. During the reporting period, the company made no major investment.

(13) Internal control of information disclosure

In accordance with laws, regulations, departmental rules, listing rules, measures and notices issued by Shenzhen Stock Exchange and other relevant provisions, the company has formulated information disclosure management system, insider information management system, external information submission and use management system and other information disclosure related systems, strengthened the management of the company's information disclosure and identified the persons responsible for information disclosure, Standardize the company's information disclosure, ensure the company's true, accurate and complete disclosure of information, and safeguard the legitimate rights and interests of the company's shareholders, especially the public shareholders.

(14) Information and communication

The company has established a good information and communication system. The company has formulated a series of rules and regulations to ensure the transparency of internal and external information and ensure the timeliness, authenticity and accuracy of information disclosure.

In terms of external information disclosure, the company has formulated information disclosure management system, insider information management system, external information submission and use management system and other information disclosure related systems to further standardize the information disclosure work and ensure the authenticity, accuracy and integrity of all the information disclosed by the company. In terms of internal communication, the company has established an information management system focusing on office automation, which has realized the company's online document approval, administrative management, document management, collaborative office and information resource sharing, improved the efficiency of internal information transmission, established effective communication channels for internal employees and improved the work efficiency of the whole company.

(15) Social responsibility

In accordance with national laws and regulations and in combination with the characteristics of the industry, the company actively performs social responsibilities and obligations in the daily business process, fully integrates them into the company's strategy and daily business activities, and actively promotes the company's social responsibility work. The company takes meeting customer demands as one of the important indicators of the company's assessment, and continuously improves the company's social image. The company has established and improved the human resource management and labor employment system to promote employment and protect the legitimate rights and interests of employees. At the same time, the company and its subsidiaries comply with the requirements of national and local laws, regulations and normative documents on labor employment and social security, and pay employees' pension, unemployment, medical treatment, maternity and industrial injury and other social insurance for their employees according to law to protect the legitimate rights and interests of employees.

（2） Basis of internal control evaluation and identification standard of internal control defects

The company organizes and carries out internal control evaluation according to the enterprise internal control standard system and the provisions of various internal control management systems of the company.

The board of directors of the company distinguished the internal control of financial report from the internal control of non-financial report according to the identification requirements for major defects, important defects and general defects of the enterprise internal control standard system, combined with the factors such as the company's size, industry characteristics, risk preference and risk tolerance, and studied and determined the specific identification standards of internal control defects applicable to the company, which are consistent with the previous years. The identification standards of internal control defects determined by the company are as follows: 1. Identification standards of internal control defects in financial reports

The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows: