Ofwat MD220 Review & Compliance
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The MD220 directive issued by Ofwat in December 2006 was primarily based around the need for a review of companies' systems, procedures and controls
for compliance with the GSS (General Service Standard) Regulations and reporting of customer service data in the June 2007 return.
MD220 required that in the first instance companies undertook a specific review and documented the systems, procedures and controls they use to manage
and report compliance with the GSS Regulations and with any of their own related guarantee standards. These systems, processes and controls also had to be
set out in a supporting methodology statement. Additionally, companies were required to explain how they mitigate existing risks and how they planned to
eliminate any identified weaknesses. The initial report on the status of process documentation and controls had to be submitted to the auditors of the water
companies by 16 February 2007, and a final report was to be submitted to Ofwat by the end of March 2007.
There is a key challenge for companies to comply with this requirement, not only in terms of the initial audit but also on an ongoing reporting basis.
For the initial response, the appointed auditors were required to: -
- Comment on how the company had defined a relevant event and relevant payments.
- Perform walkthrough tests of the company’s systems, procedures and controls as set out by the company in the methodology statement
for the identification of each relevant event, payments of relevant amounts and reporting of such events and amounts in the June 2007
return in accordance with the June return reporting requirements.
- Confirm that the systems, procedures and controls described in the company’s methodology statement were those currently in operation.
Where this was not the case, identify and explain areas where the methodology statement was incorrect or incomplete.
- Identify and set out weaknesses in the company’s systems, procedures and controls that could lead to non-identification of relevant
events, including specific consideration of actions or triggers which could result in a payment under more than one GSS regulation. For
example, a letter of complaint about low pressure and supply interruptions, non-payment of relevant amounts or mis-reporting.
- Set out any necessary improvements to systems, procedures and controls identified by the auditor during the course of the work.
- Consider whether the company’s mitigation of the risks it has identified, the controls it has in place and its plan for improvement
adequately deal with those weaknesses.
This regulatory compliance requirement is very similar in principle to the requirements of section 404 of the Sarbanes-Oxley act. SECOR has
a wealth of experience in the area of regulatory compliance in the UK Water, Energy and Communications sectors, having worked for a significant
number of the major companies in these sectors.
SECOR supported a number of major water industry companies in complying with the MD220 directive and with their June 2007 reporting, using
our experience gained from Sarbanes-Oxley and other compliance work.
If you would like to learn how we can help you with ongoing MD220 requirements and compliance with the GSS Regulations and Ofwat reporting,
or other compliance services, please contact SECOR on +44 20 8942 0252 or email info@secorconsulting.com.
Follow this link to access the MD220 details from the Ofwat website.
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