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The end of an era?

Communities and Local Government (CLG) Secretary Eric Pickles has announced plans to disband the Audit Commission. The reason being, he says, 'to pass power down to the people, replace bureaucratic accountability with democratic accountability and save the taxpayer £50m a year'.

He also stated that 'the Commission's responsibilities for overseeing and delivering local audit and inspections will stop; its research activities will cease; the audit function will be moved to the private sector; councils will be free to appoint their own independent external auditors from a more competitive and open market; and there will be a new audit framework for local health bodies. This will save the taxpayer money and decentralise power to a local level'.

Is this a good thing? Already the jury is out. Some are in favour of the change, indeed 'high-profile local authorities are drawing up plans in view of a world without the Commission'; others think this is a bizarre move by the Government and 'will prove costly in the long term'.

In a recent blog, Michael Izza said: 'ICAEW recognises the very significant role that the Commission has played for 27 years in scrutinising local public services. In determining a replacement for the Commission, the Government has recognised the principle of having independent assurance at a local level undertaken by a qualified auditor. It also recognises that the skills and expertise provided by auditors do offer value to taxpayers and are an important component in the overall system of oversight of public bodies that spend public money.

'The new regime will see the NAO take on a greater role in defining the framework for local public service auditing with the actual work undertaken by the private sector. Such a strategy has the potential to create greater competition and choice within the audit market, and could be a real opportunity for accountancy firms outside the larger practices.

'The new structure proposed by the minister will need to build on what was best about the Audit Commission, but it should also be open to innovation from the private sector as it takes on such an important responsibility.'

What does the future hold for the in-house practice of the Commission (quoted as being the fifth largest audit practice)? It has appointed Gareth Davies as the new managing director of the audit practice. He will review a range of options, including sale, a management buyout and the setting up of a mutual organisation. Whatever happens over the coming months, there will still be a need for an audit of local public services. until the end of 2011/12, the Commission's auditors and suppliers (the firms) will continue the audit. From the 2012/13 financial year, a new system will be in place.

The new audit arrangements are still to be determined. No announcement has been made as to what will come into place. But it is thought that up to 11,000 bodies will be affected. In a debate in the House of Commons on 7 September, Eric Pickles stated that 'all local audits will be regulated within a statutory framework, overseen by the National Audit Office and the profession'.

Indeed, this is the end of an era...and end of a chapter in the history of local public services... but possibly the start of something new (an opportunity perhaps) for both the private and public sectors working together in the public interest.

This article was originally published in the October edition of the Audit and Assurance Faculty's publication Audit and Beyond.

Sumita Shah, ICAEW, Public Sector Group News - October 2010