Ofwat blasted for allowing struggling water firms to not employ auditors
The UK’s professional association of auditors has warned Ofwat that all water companies need internal auditors as the torrid performance of utility firms continues to fester.
A weekend report from the Financial Times says that the body recently wrote to Ofwat chief David Black pressing its concerns and highlighting that three water providers – South East Water, Sutton and East Surrey Water and Portsmouth Water all lack the internal presence.
The firms together provide services to around 3.7m UK customers.
“This is concerning given the complex operational and financial landscape these companies navigate, involving the management of critical national infrastructure and environmental responsibilities,” the Chartered Institute of Internal Auditors said in the letter.
It added that the lack of internal auditors within utility firms “represents a significant weakness in their audit and corporate governance framework”.
Audit capability requirements are present across the demands from other regulatory bodies, including Ofgem, the CIIA said and their inclusion could help support Ofwat “secure the providers’ long-term operational resilience”.
The letter comes as the utility industry faces growing rancour from investors, policymakers and the general public amidst a growing stockpile performance issues amidst a rise in customer bills.
Ofwat has already identified South East and Sutton Water and East Surrey Water as being financially at-risk, the latter having been recently snapped up by utility giant Pennon Group for £380m.
The former paid out £2.3m in dividends to investors in its latest financial year despite growing losses and a £3m bill thanks to summer heatwaves and supply problems.
Portsmouth Water meanwhile was criticised by Ofwat late last year for failing to correctly pay its executives in line with its performance.
The UK’s largest water provider, Thames Water continues to dominate attention amidst the wider troubles of utility firms, with an £18bn-and growing debt pile and
The government, it would seem, has cottoned onto the fact that there may come a day when it is required to bail out the firm and has quietly taken steps to shore up any potential investments.
An Ofwat spokesperson said that the body has increased its regulatory oversight of utility firms to improve their financial resilience.
They added: “Companies need to continue to improve their performance for customers and the environment and we will use all the regulatory powers at our disposal to ensure that happens.
“To deliver better outcomes for customers, water companies need to make sure they have the right structure, skills and capabilities in place and that needs to cover a range of disciplines.”
South East, Sutton and East Surrey and Portsmouth Water were all contacted for comment.