By Lucy Phillips | 28 July 2011
The Audit Commission is to be split into two – one stand-alone audit company to bid for contracts against other market players and a residual body to oversee contracts and appointments.
The government today said all the commission’s work would be outsourced to the private sector in the next financial year. This would allow some employees in the commission’s audit practice to transfer into a stand-alone entity, subject to it winning contracts. Other audit staff will transfer to private firms with their work.
A small number of managerial and support staff at the watchdog would remain in place to oversee contracts and make audit appointments until the legislation has passed.
It is understood that Gareth Davies, managing director of the audit practice, will head the new company and commission chair Michael O’Higgins will remain in charge of the residual body.
In a statement to Public Finance, Davies said: 'The leaders of the Audit Commission's audit practice confirm their intention to bid for the work on offer in the coming procurement on behalf of an employee-owned successor to the audit practice. More details on the proposed bid will be provided when the procurement process starts.'
The announcement follows a consultation by the government which ended on June 30.
Communities Secretary Eric Pickles said: ‘We have set in train measures to save council taxpayers money by radically scaling back on the centrally imposed, bureaucratic and costly audit and inspections previously undertaken by the Audit Commission.
‘This government is determined to refocus local audit on helping local people hold councils to account. We believe that the next step is to outsource the audit practice next year as a way to secure best value for money.
‘We are working closely with the Audit Commission to design a fair procurement process that will allow a wide range of bidders, whether a mutual or private sector accountancy firm, to compete for the commission's audit business.
‘Outsourcing will also allow further progress to be made on the new audit framework that will give councils the power to appoint their own auditors.’
The commission has begun preparatory work for outsourcing its 2012/13 contracts, which are expected to run for three to five years, giving councils and other local bodies time to plan for appointing their own auditors.
O’Higgins said: ‘Today’s announcement brings welcome clarity about the future of our audit work. The Audit Commission has been working with the Department for Communities and Local Government for some time on potential options for our in-house audit practice. The commission’s board had already put in hand preparatory work for outsourcing and will now consider the next steps in the process in the light of the announcement. We will continue to work closely with the DCLG and other departments on this and other issues relating to the commission’s future.
'We will be writing to audited bodies shortly to set out the implications for them.'
