Best councils ‘penalised’ by audit fee changes, says LGA

5 Nov 09
Changes to the Audit Commission’s fee regime will penalise high-performing councils, which will no longer be able to secure generous discounted rates, according to the Local Government Association
By Helen Mooney

05 November 2009

Changes to the Audit Commission’s fee regime will penalise high-performing councils, which will no longer be able to secure generous discounted rates, according to the Local Government Association.

Nick Easton, a senior consultant at the LGA, told Public Finance that proposals to reduce the rates at which high-performing local authorities could qualify for a reduction in audit fees was ‘disappointing’.

He said: ‘The commission appears to have retained its proposal to narrow the band within which fee scales can be varied. In practice, this could mean that a high-performing council currently able to negotiate a 30% reduction in fees is now only able to negotiate a 20% reduction, in effect leading to an increase in fees, which is disappointing and perverse.’

The Audit Commission published its scales of audit and inspection fees for 2010/11 and indicative fee proposals for 2011/12 and 2012/13 on October 30.

It is set to cut the audit fees it charges NHS organisations and probation boards and trusts next year. But audit fees for councils, fire authorities and police are to rise by 6% as a result of the increased workload generated by the move to International Financial Reporting Standards. The Audit Commission will subsidise some of this extra cost.

The separate inspection fee for local authorities will be kept at the same rate as this financial year.  
Audit Commission chief executive Steve Bundred said: ‘It’s good to be able to announce that for many organisations audit costs will go down next year, and costs won’t increase for most bodies. I’m sure that will be welcome with the financial squeeze ahead. The new fees scales reflect views from the consultation.’
 
The commission said that the cost of an audit was a ‘tiny fraction’ of what public bodies spend. It said that on average public sector organisations pay less than 0.05% of their overall spending on audits.  

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