Audit Commission to close before April 2015
By Vivienne Russell
| 6 July 2012
The Audit Commission will cease to exist by April 2015, it was revealed today as ministers published the draft Local Audit Bill.
A ‘key milestones’ timetable included in Bill’s impact assessment says 2014/15 would be the final year of operation for the residual commission. This is almost five years after the commission's abolition was announced in August 2010.
According to the timetable, new regulation arrangements for local public audit would be introduced in 2015/16, and a new body would take over from the Audit Commission to manage the final two years of the five-year outsourced local audit contracts, which begin in September. Local authorities will begin to appoint their own auditors in 2016/17 when the outsourced contracts have run their course.
The long-awaited Bill makes provision for the closure of the Audit Commission and the transfer of its assets, liabilities and continuing functions to other bodies.
It confirmed that the National Audit Office would set the code of audit practice for local government and carry out value-for-money studies in the sector. Regulation of local audit services would mirror private sector arrangements, with responsibility transferring to the Financial Reporting Council and professional accountancy bodies. CIPFA is set to work with the NAO on the production of guidance covering the procurement of audit services and the work of auditors.
The National Fraud Initiative would be retained, although ministers have yet to decide which body its work would transfer to.
Arrangements for the audit of smaller local bodies – those with a turnover of £6.5m or less – were set out alongside the Bill. These confirmed plans to retain the current ‘light touch’ audit regime, known as limited assurance. Bodies with an annual turnover below £25,000 would no longer be subject to external audit, although local people would still have the ability to raise objections and have complaints investigated by an auditor if that were deemed appropriate.
Smaller bodies would also have the option of having the procurement and appointment of their audit services carried out by a sector-led body. This follows a suggestion tabled last month by the National Association of Local Councils and the Society of Local Council Clerks.
Communities Secretary Eric Pickles said the Bill would ‘recast local audit’, make councils more accountable to their citizens and save the public purse £650m over the next five years.
He added: ‘But we are determined to ensure that councils continue to deliver the high-quality service their residents deserve, which is why our new framework will uphold the tough standards of auditing we expect.’
Ian Carruthers, policy and technical director at CIPFA, said: ‘The draft Bill provides welcome clarity on the overall shape of the future local public audit regime, as well as the role of qualified professionals with this. CIPFA will continue to work with partners to develop practical supporting arrangements for the new regime.’
Peter Fleming, chair of the Local Government Association’s improvement board, said a more localised approach to auditing was long overdue. But he urged the government to look again at the need for ‘bureaucratic’ independent audit panels.
‘Audit makes an important contribution to providing reassurance about how public money is spent. However, the new system must be based on allowing local people to hold town halls to account, rather than through central prescription and red tape,’ Fleming said.
As the Bill is in draft form it is subject to consultation, which will run until August 31. Response forms can be accessed here.