By Richard Johnstone | 28 March 2014
New outsourced audit contracts could save local authorities as much as £80m by the end of the decade as a result of lower fees, the Audit Commission announced today.
The commission has completed the retendering of contracts for around one-third of local audits, which was first announced last year. The deals were retendered to find further savings on top of those achieved in 2012 when the commission outsourced its audit practice. The contracts are for two years and can be extended for a further three years.
In the deals announced today, EY and KPMG both won contracts worth £9.6m a year to audit in the north and the south of England. BDO has also won a contract, worth £4.6m a year, to undertake audits in the south.
Based on these figures, a total of £30m will be saved through lower costs over the period to 2017, controller of audit Marcine Waterman said. This could rise to £80m if an option to extend the agreements to 2020 is picked up.
As a result of the commission's outsourcing programme, London boroughs can expect to save £1.4m to 2020, county councils will see fees fall by £1m, districts will benefit by £400,000 and NHS trusts by £300,000, she added.
Government reforms mean councils and other bodies will procure and appoint their own auditors when the outsourcing deals expire. However, these savings showed the benefit of central procurement, the commission said.
‘This is part of the rich legacy that the commission will leave when it closes, knowing that these savings for public bodies have been locked in and that we have significantly reduced audit fees in a time of financial austerity,’ Waterman added.
‘It is unlikely that such savings will be replicated under the new local procurement and appointment framework.’
Commission chair Jeremy Newman warned that audit fees could rise if the contracts, which will be overseen by the Local Government Association after the commission closes, were not continued to 2020.
‘We hope the government will recognise the opportunity to extend all the contracts and protect the low prices we have secured up to 2020,’ he said.
‘If the contracts aren’t extended, it would mean that audit prices are likely to go up, and potential further savings of some £190m for local government and health bodies will be lost. If all the contracts are extended to 2020, the total savings to the public purse since 2012 will be some £440m. Over the same period, the commission will have reduced audit fees by 55%.’
