The Chartered Institute of Internal Auditors (CIIA) has warned Ofwat of the need to ensure that all the water companies have internal auditors, according to a report by the Financial Times at the weekend.

The leading financial media organisation said the warning comes in a letter sent by the CIIA to Ofwat Chief Executive David Black - the letter describes the lack of internal auditors as “a significant weakness” which should be addressed by the industry regulator.

The letter cites Portsmouth Water, Sutton and East Surrey Water and South East Water as examples, commenting:

“This is concerning given the complex operational and financial landscape these companies navigate, involving the management of critical national infrastructure and environmental responsibilities.”

Pointing out to Ofwat that other regulators, including Ofgem, have internal audit capability requirements, the letter says their inclusion could help the water sector regulator “secure the providers’ long-term operational resilience”.

The FT article explains that internal auditors are used by companies to independently identify and assess how business risks ranging from financial to cyber security and other operational risks are managed.

The water companies have been facing sustained levels - mostly negative - of high profile media coverage, with Thames Water coming in for particular attention with regard to its current troubled financial situation.

The FT article makes no reference to Thames Water – which has its own Internal Audit and Assurance team.  However, in its updated January 2024 Service Commitment Plan to Ofwat, Thames Water says “there are many challenges that need to be addressed, both as a result of ageing and fragile infrastructure and a lack of financial and operational grip.”

Click here to access the FT article online