Developing options for the most effective transfer of the audit commission

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Local councils were today updated on Government plans to secure a value for money transfer of the Audit Commission’s in-house practice into …

Local councils were today updated on Government plans to secure a value for money transfer of the Audit Commission’s in-house practice into the private sector, announced Local Government Minister Grant Shapps.

In August last year the Secretary of State for Communities and Local Government announced plans to disband the Audit Commission and refocus audit on helping local people hold their councils and other public bodies to account for local spending decisions.

Since then Ministers have been examining the most cost effective options for disbanding the Audit Commission, transferring audit into the private sector and allowing local authorities to appoint their own auditors. In a letter from the Department’s Permanent Secretary today councils were told that Ministers’ initial view is that the best value for money option is to outsource all the audits currently undertaken by the in-house practice to the private sector.

In order to ensure that progress can be maintained on the options, Ministers have asked the Audit Commission to begin substantive preparatory work for outsourcing the 2012/13 audits. The Commission has been asked to design a procurement process that allows a range of firms to bid, including the possibility of an in house bid which could form the basis of a new employee owned mutual.

If Ministers do choose to opt for outsourcing all the 2012/13 audits, this would mean the Commission would be radically reduced by the end of 2012, leaving a small residuary body overseeing the contracts until local public bodies are in a position to appoint their own auditors.

Mr Shapps said:

This Government has set in train measures to radically scale back centrally driven, bureaucratic and costly inspection and auditing, saving council taxpayers money.

We are working closely with the Audit Commission on options to transfer the audit practice into the private sector. Our initial view is that outsourcing could prove the best value for money and we have asked the Commission to start work on paving the way for outsourcing the 2012/13 audits to keep this option open before we make a final decision.

We are determined to make sure that councils and other local bodies’ interests are fully taken into account in any transition.

The work that the Audit Commission has been asked to undertake signals further progress towards disbanding the organisation. A final decision on the future of the in-house practice will be announced shortly.

The Government has already abolished CAA and the Commission’s programme of inspections has ended. Proposals on the future local audit framework are currently also out for consultation:

The consultation which, is due to close on 30 June 2011, sets out proposals on the new audit framework where: audit quality is regulated within a statutory framework, overseen by the National Audit Office and the accountancy profession and where local public bodies will be free to appoint their own external auditors with stringent safeguards for independence.

Following the close of that consultation, [and once the Communities and Local Government Select Committee’s report of its inquiry on audit and the inspection of local authorities has reported], proposals will be published in a draft bill to allow full Parliamentary scrutiny. A final bill will then be introduced as soon as Parliamentary time allows.

Notes to editors

The Department for Communities and Local Government’s Permanent Secretary has written to the Chief Executives of all local authorities today to update them on latest stage of the plans to disband the Audit Commission. In the letter he makes clear that the Department will be working closely with local government throughout the transition and with the Commission on the options for transferring the work of the in-house audit practice into the private sector. A copy of the letter can be found at:

Should Ministers decide to pursue an outsourcing option many of the Commission’s audit staff would transfer with their work to the private sector under TUPE terms. In line with previous practice, the Commission plan to allow for a significant period of consultation with local authorities prior to finalising appointments. Their procurement and consultation timetable means that appointments are likely to be finalised after April 2012 - by 1 September at the latest, which will be manageable as the focus of auditors work in the first half of the financial year is generally on the previous year’s accounts.


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