Audit Commission warns of dangers of its abolition

4 Feb 11
The Audit Commission has given a damning verdict of the government’s plans for local government audit following the watchdog’s abolition in 2012.

By Lucy Phillips

4 February 2011

The Audit Commission has given a damning verdict of the government’s plans for local government audit following the watchdog’s abolition in 2012.

In a written submission to the Commons communities and local government select committee, the commission warns that moving to new arrangements will be ‘complicated and protracted, bringing significant financial and governance risks’.

The spending watchdog also appears to make a last ditch attempt to persuade the government to reform it, rather than scrap it altogether, saying: ‘A number of commentators have expressed a view that the commission should be reformed, as it has been in the past, so it is fit for the future.

‘It is now for ministers and Parliament to decide how the commission’s experience could contribute to effective, efficient and accountable local public services in support of the wider localism objectives.’

The commission’s submission is part of an inquiry by MPs into the decision to abolish the watchdog, announcedby Communities Secretary Eric Pickles last August, and the future audit and inspection of local authorities. Pickles plans to open up the audit market and allow councils to appoint their own external auditors.

Legislation to enable the changes is currently being drawn up, as are plansto mutualise the commission’s audit practice or transfer it to the private sector.

But the commission says it would be ‘counter intuitive’ to abolish some of its wider functions, warning that this would lose ‘valuable’ expertise on value for money, data, analysis, governance and assessment ‘when severe financial pressures are increasing the risk of financial or service failure in local public bodies’. 

CIPFA also submitted writtenevidence to the inquiry. It warned of the need to ‘stress test’ the new arrangements, as auditors would not have the commission ‘standing behind them in both technical support and liability terms’.

The institute also said that without a unified pricing framework, the cost of audit was likely to vary from council to council. ‘Larger public bodies are likely to be particularly attractive clients, and this will be reflected in fee proposals. Smaller and more remote councils will be less attractive audits. Safety net arrangements are likely to be required to ensure that such audits can be procured at a reasonable cost.’

The inquiry published 209 pages of evidence on February 2, ahead of the first oral session onMonday. Among those due to give evidence are David Walker, former managing director for communications at the Audit Commission; David Heald, professor of accountancy at University of Aberdeen Business School; and Steve Martin, professor of public policy and management and director of the Centre for Local and Regional Government Research at Cardiff University.

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