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Reporters & auditors
OUR REPORTERS The Reporters and reporting teams act as professional commentators and certifiers on the regulated activities of individual water undertakers and water and sewerage undertakers – termed water companies. All water companies in England and Wales have to provide us with a wide range of regulatory information, annually in their June Returns and Charges Schemes and during a Periodic Review. This information needs to be well founded, and provide a consistent base of industry wide comparative information for regulatory decision making. We therefore require each water company in England and Wales to appoint an independent professional to examine, test and give his opinion on this information. Reporters work closely with their companies during the development of their regulatory information submissions
The appointment of Reporters is consistent with companies Licence conditions B, C, F, J and L. The role of the Reporter and financial auditors is summarised in Information Note 28. The reporter protocol formally sets out the job the Director requires the Reporter to do, and the mechanism for their appointment. The protocol is kept under review to ensure that it is always up to date. Irene Millward, Reporters Coordinator at Ofwat, will also be pleased to help you. Write, e-mail or telephone her at: irene.millward@ofwat.gsi.gov.uk Irene Millward Reporters Coordinator Ofwat Centre City Tower 7 Hill Street Birmingham B5 4UA Telephone: 0121 625 1487 About Reporters Reporters are named individuals, not firms. We expect the Reporter to
Because of the nature of the water (and sewerage) industry we expect the named Reporters to be professionally qualified, and for their core team members to have appropriate specialist expertise and qualifications in technologies used in the water industry. In most instances the Reporters are chartered consulting engineers. The team should also have available expertise in financial and general business management disciplines because we collect substantial financial and costs information and data on billing queries, customer complaints and other customer service indicators. The Reporter's team must, therefore, be able to carry out an informed scrutiny to support a sound opinion on a wide range of information. The Reporter works alongside company financial auditors to avoid duplication of audit wherever possible, but also to ensure full audit coverage of commercial topics which have hitherto fallen outside the remit of engineers. They prepare audit plans which set out their respective responsibilities. New entrants are expected to demonstrate familiarity with the regulatory regime, or be able to demonstrate how they will gain that familiarity within a short timescale. They should also be able to demonstrate flexibility in approach and the ability to work effectively with other professionals and company staff in support of the regulatory process. Reporter Workload Reporters' workloads vary with the size and nature of the water company, the annual cycle of returns and the five yearly cycle of the periodic review process.
Ofwat and Reporters We prefer succinct reports which address their key concerns and issues not covered by the company in their submission. To achieve this we
Each company manages the appointment process and the contract with its Reporter. It is responsible for
Auditors Auditors are appointed to examine water companies' statutory accounts in the same way as they do for any other company. Under a condition of each company's licence they are also required to examine the regulatory accounts (financial statements prepared in accordance with our guidelines). These regulatory accounting guidelines (RAGs) ensure that all companies account for their activities in the same way and that the regulatory accounts give us a clear picture of water companies' financial performance. The auditors give an opinion in a similar way as they do on statutory accounts. Each company is required by the conditions of appointment (licence) to make an annual return to us, covering its activities in the previous financial year. We call this 'the June return' and it is the main source of information that we require from the companies. Auditors are required to report on the financially focused areas of the June return. They are required to submit a detailed report covering the procedures listed in the June return auditor guidance. We review and update this guidance every year and the work is carried out under auditing standards. Auditors also submit a detailed report on each company's compliance with our transfer pricing guideline – RAG5. Auditors also examine the companies' principal statements, submitted each January, and report on whether they have been properly drawn up. Principal statements contain information that comes from the regulatory accounts and are used to prepare the companies' charges schemes, which we approve each year. Companies are responsible for appointing the statutory auditors. We review the terms of engagement and sign a side letter, which means that the auditors also owe a duty of care to Ofwat. The Institute of Chartered Accountants in England and Wales published a technical release, 05/03 'Reporting to regulators of regulated entities', which sets out audit arrangements when auditing regulated companies. Ofwat and auditors To ensure that we derive maximum value from the work the auditors do, they must have a clear understanding of:
To achieve this, we:
Companies and auditors Each company manages the appointment process and the contract with its auditors. It is responsible for:
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