Audit Commission (United Kingdom)


The Audit Commission was a statutory corporation in the United Kingdom.
The Commission’s primary objective was to appoint auditors to a range of local public bodies in England, set the standards for auditors and oversee their work. The Commission closed on 31 March 2015, with its functions being transferred to the voluntary, not-for-profit or private sector.
On 13 August 2010, it was leaked to the media, ahead of an official announcement, that the Commission was to be scrapped. In 2009-10 the Commission cost the central government £28m to run, with the remainder of its income coming from audit fees charged to local public bodies.

History

The Audit Commission was established under the Local Government Finance Act 1982, to appoint auditors to all local authorities in England and Wales and it became operational on 1 April 1983. The National Health Service and Community Care Act 1990 extended the remit of the Commission to cover health service bodies. Legislation covering the Commission’s activities was consolidated into the Audit Commission Act 1998. In 1985-86 the commission led the investigation of the rate-capping rebellion which resulted in 32 Lambeth councillors and 47 Liverpool councillors being surcharged and banned from office.
The Commission gained responsibility for auditing the National Health Service in 1990, and fire and rescue services in 2004. In 1996 the Commission began joint reviews of social services, and in 1997, reviews of local education authorities jointly with OFSTED.
On 1 April 2005 the Commission's remit in Wales transferred to the Auditor General for Wales.

Westminster Council 'homes-for-votes'

The gerrymandering scandal at Westminster Council was uncovered by the Audit Commission's District Auditor, John Magill, who found that between 1987 and 1989, council houses were sold at below market value to families likely to vote Conservative.
Mr Magill found the former leader of the council, Dame Shirley Porter and five other council officials 'jointly and severally' liable for repaying £36.1 million to the council. Mr Magill's verdict was upheld in the House of Lords in 2001. Dame Shirley Porter eventually settled in 2004, paying £12.3 million to Westminster Council.

National Fraud Initiative

Since 1996 the Audit Commission has run the National Fraud Initiative, a UK-wide anti-fraud programme. Between 1996 and 2013 it traced £1.17 billion in fraud, including £215m in 2008-9, as more councils provided data and most recently £203m in 2012-13.

Closure

On 13 August 2010, the Secretary of State for Communities and Local Government, Eric Pickles, announced that the Commission was to be scrapped, with its functions being transferred to the voluntary, not-for-profit or private sector. The government aimed to save £50m annually, with the Commission's function transferred to local council ombudsmen and private accounting firms.
Accounting body ACCA expressed doubt that the private sector would match the commission’s experience and consistency.
The Financial Reporting Council suggested to a House of Lords committee that Government should not sell the Audit Commission's practice to any of the Big Four auditors, otherwise their dominance of the audit market would be further enhanced.
In 2012 a proposed employee-owned firm won only one of ten regional contracts, and was launched as a subsidiary of Mazars. Grant Thornton won the largest share, 4 contracts, and took on about 350 staff from the Commission. KPMG and Ernst & Young won 3 and 2 contracts respectively. The Commission estimated that audit fee savings at 'up to 40%' will arise as a result of these arrangements.
A small number of staff were retained at the Audit Commission to monitor these contracts until the Commission was abolished. Legislation to abolish the Commission was included in the Local Audit and Accountability Act 2014, and the Commission was formally closed on 31 March 2015.

Function

Functions of the Audit Commission included:
The Audit Commission worked in partnership with, but operated independently of, a number of Government Departments including the Department for Communities and Local Government, the Home Office, and the Department of Health.
Previously the Commission also produced performance assessments for councils, fire and rescue services, and housing organisations. In July 2009, it launched the Comprehensive Area Assessment, which assessed the effectiveness of local public services.

Funding

Between 1983 and 1998 the Commission was self-funding, operating purely on income from audit fees. In 1998 the central government began providing grants to the Commission due to its new responsibilities under "Best Value" legislation, and for the cost of setting up the Best Value and Housing Inspectorates.
In 2009-10 the Commission had operating income of £213.1m. 86% of this came from fees charged to bodies audited; just 13% came from central government grants. Around 70% of the Commission's income in 2009-10 came from the local government sector, with the remainder coming from the health sector. Before the Coalition government announced further cuts, the Commission had planned to cut spending by £32.1m by March 2013.
Thirty percent of the Commission's audits were carried out by five private audit firms.

Structure

Chairman and Commissioners

The governing board of the Audit Commission was made up of Commissioners appointed by the Department of Communities and Local Government. Previous chairman included Jeremy Newman, former Chief Executive of BDO International and Michael O'Higgins, who had for 10 years previously been managing partner of PA Consulting.

Controller of Audit / Chief Executive

Marcine Waterman took up the post of Controller of Audit in September 2012.
Previous incumbents include Eugene Sullivan, Steve Bundred, Sir John Banham, Sir Howard Davies, Bank of England, FSA and LSE, and Sir Andrew Foster.

Criticism and controversy