WIREDGOV

The Audit Commission is reducing audit fees for local public bodies by £30 million from 2015 to 2017, taking total fees to the lowest level since the Commission took on NHS audit in 1990. ^[1]

The announcement came as the Commission launched its final consultation on work programme and scales of audit fees. These relate to the 2015/16 financial year. The fees will reduce by 25 per cent, following the Commission’s successful retendering in March 2014 of the work done under its older contracts. The latest reduction is in addition to the 40 per cent drop in fees made by the Commission in 2012.

If the government chooses to extend both the 2012 and 2014 contracts to 2020, to lock in these low fees, the saving to audited bodies from 2012 would be £440 million. ^[2]

Chairman of the Audit Commission, Jeremy Newman says: ‘We have driven down prices for audit services, showing again that bulk procurement is the best way to maintain a competitive market and provide taxpayers with value for money. The resulting savings are part of the legacy the Commission will leave after March 2015, and will be enjoyed by local authorities and NHS bodies for years after our closure. Fees should be preserved at this level for 2016/17 and we hope the government will take the opportunity we have secured to lock in and extend the savings we have achieved up to 2020.’

At the same time as unveiling this latest proposed change to audit fees for audited bodies, the Commission is returning a further £6 million to its audited bodies in rebates. The rebates result from the efficient management of the Commission’s closure, which will come in March 2015. The Commission has found new homes in other organisations for all of its core functions, and as the associated staff are transferring to carry out these functions, redundancy costs have been reduced.

Chairman of the Audit Commission, Jeremy Newman comments: ‘I am delighted to announce that the Audit Commission will be returning £6 million to audited bodies in rebates this month. Our financial strategy since 2012 has been to return retained earnings to audited bodies wherever possible. This £6 million rebate follows the £8 million we announced in March 2014. We plan to return any remaining surplus earnings to local public bodies after we close in March 2015. By giving money back now, it will allow the bodies to include the rebate in their financial planning for 2015/16. I hope this move will be welcomed as further evidence of the Commission reducing the cost of public audit.’

The arrangement to redistribute the work of the Audit Commission, and transferring Commission staff into the successor bodies, will secure the ongoing impact of the Commission’s core work for the public sector. It will also ensure that the Commission’s legacy is more than just financial.

From 1 April 2015 a transitional body, Public Sector Audit Appointments Limited (PSAA), an independent company set up by the Local Government Association, will oversee the Commission’s audit contracts until they end in 2017 (or 2020 if extended by the Department for Communities and Local Government). PSAA’s responsibilities will include setting fees, appointing auditors and monitoring the quality of auditors’ work. The responsibility for making arrangements for housing benefit subsidy certification and for publishing the Commission’s Value for Money Profiles tool will also transfer to the PSAA.

Responsibilities for publishing the statutory Code of Audit Practice, guidance for auditors and local value for money studies will transfer to the National Audit Office. Responsibility for the National Fraud Initiative and for the Commission’s counter-fraud function will transfer to, respectively, the Cabinet Office and the Chartered Institute of Public Finance and Accountancy.

Footnotes

[1] The Audit Commission has audited local government bodies since it was created in 1983. Legislation in 1990 extended the Commission’s remit to cover NHS bodies. The first audit for NHS bodies was for the 1990/91 financial year.

[2] 70% of the audit work for the Commission is carried out under contracts let in 2012. Contracts for the remaining 30% of the work were let in 2014. Over a 5-year period (if the government decides to extend the contracts up to 2020) the total savings from the 2014 contracts will be £80 million. If both sets of contracts are extended, then the total saving from 2012 to 2020 will be £440 million.

Notes to editors

1. Under Section 7 of the Audit Commission Act 1998 and Section 12 of the Local Government Act 1999, the Commission has a statutory duty to prescribe scales of fees for the audit of accounts, and inspections. Before prescribing any scales of fees we consult audited and inspected bodies, their representative bodies and the accountancy profession. Once the Commission has prescribed a scale of fees, the applicable fee becomes payable by the body.
2. In law, the Commission must meet the costs of audits and its other statutory functions through audit fees.
3. In setting scales of fees the Audit Commission considers: its responsibility to ensure that auditors have appropriate resources to meet their statutory and professional responsibilities; its statutory duties, taking one year with another, to balance expenditure and income for each sector – local government and health; the expectations of government and other stakeholders; and the affordability of any changes.
4. The Audit Commission’s role is to protect the public purse. We do this by appointing auditors to a range of local public bodies in England. We set the standards we expect auditors to meet and oversee their work. Our aim is to secure high-quality audits at the best price possible. We use information from auditors and published data to provide authoritative, evidence-based analysis. This helps local public services to learn from one another and manage the financial challenges they face. We also compare data across the public sector to identify where services could be open to abuse and help organisations fight fraud.