National Grid to Improve Financial Expense & Reporting Practices in US Based on Findings of Independent Review

WALTHAM, MA (04/07/2011)(readMedia)-- A five-month independent review of National Grid's accounting systems and practices across its U.S. operations has found no indication of deliberate misallocation of expenses on the part of the company. The report by Liberty Consulting Group found that a number of control issues were deficient, due in part to the use of different legacy accounting systems resulting from company mergers.

National Grid last year hired Liberty to conduct a comprehensive review of its accounting systems and practices in the U.S., and the report includes a series of recommendations for improvement, many of which are already underway or in development.

The Liberty report focuses primarily on those areas needing improvement and attention, and not on those areas where National Grid is performing well. Among its central conclusions, Liberty recommended that the company should:

  • Focus its financial reporting on the jurisdictions in which it operates rather than on a line-of business operating model.
  • Improve the controls and training relating to cost allocation.
  • Move to a single, consolidated financial platform and a single set of cost allocation methodologies for the US businesses.

"We are moving quickly on these issues, with some actions already underway," said Tom King, president of National Grid in the U.S. "We will implement both short-term and long-term improvement plans so we can rebuild the confidence of regulators and customers in National Grid in the U.S.

"We engaged Liberty because of their reputation as being both thorough and independent. We wanted a report that would take a critical look at those areas where we need to improve, and this will help guide us going forward."

National Grid has previously announced – and is in the process of implementing – a major restructuring of its U.S. businesses to create a stronger regional focus in the states where it provides service. The initial phases of that restructuring, including the naming of most senior leadership, officially took effect this week.

Under the new structure, regional presidents have been named and been given responsibility for their respective jurisdictions to deliver focused regional business plans that respond to stakeholders' expectations and needs. They will work closely with other U.S. senior managers across National Grid responsible for operations, network strategy, customer service, regulatory affairs and areas such as fleet, property and materials.

Liberty also reviewed in detail National Grid's policies and costs regarding employees on assignment outside their home country. The recommendations in the final report focus on improving the procedures for the expatriate program and the adoption of new or revised expatriate cost guidelines.

The company is currently working to implement a single, consolidated financial reporting platform, and has taken steps to improve the transparency of its cost allocations and its response to audits and regulatory inquiries. National Grid also is improving the training of employees across the company on cost allocation issues.

The company will share the report shortly with regulators in its various US operating areas.

Liberty Consulting is a nationally recognized leader in providing independent reviews of regulated businesses. Its report is based on hundreds of data requests and employee interviews, site observations of systems operations, on-site document reviews, transaction testing and numerous working sessions.

National Grid is an international energy delivery company. In the U.S., National Grid delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA). It is the largest distributor of natural gas in the northeastern U.S., serving approximately 3.4 million customers in Massachusetts, New Hampshire, New York and Rhode Island. National Grid also owns over 4,000 megawatts of contracted electricity generation that provides power to over one million LIPA customers.

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