Audit Commission to Close Under Reform Plans

A draft Bill setting out measures to close the Audit Commission and establish new arrangements for the audit of local government bodies was announced in the Queen’s Speech yesterday.

The Bill will require local government bodies to appoint their own auditors on the advice of an independent panel and establish an audit regime regulated by the Financial Reporting Council (FRC) similar to private sector practice. This will essentially allow local councils and other public bodies to appoint their own independent auditors from an open and competitive market.

Responsibility for developing the code of audit practice would transfer to the National Audit Office (NAO). However, Secretaries of state for Communities and Local Government would retain powers to commission inspections of hitherto high-performing councils when concerns are raised.

The Department of Communities and Local Government estimates the local audit reforms, together with the end of inspection work and the disbanding of the Commission, would save the public purse around £650m over five years.

The Audit Commission's central inspection regime has been halted and outsourcing of the Commission's in-house audit practice to the private sector has commenced. This will deliver 40% fee reductions for councils when the contracts commence in September 2012.

Commenting on the audit overhaul, Andy Sawford, chief executive of the Local Government Information Unit (LGiU) said:

‘Local Authorities will not mourn the passing of the Audit Commission but they will want to know that any new arrangements are light touch and can be effective in giving the public confidence and helping local authorities to improve the effectiveness and value for money of local services.’

The draft Local Audit Bill will be published during the summer.