By David Hencke | 7 July 2011

Every public body with annual spending of up to £6.5 million will escape audit under government plans.

The government’s own consultation paper on the proposed shake-up of the auditing of local authorities with the scrapping of the Audit Commission says that 9,900 public bodies spend less than this figure.

All public bodies, no matter how small, are currently audited. Those spending under £1 million a year receive a limited audit, and the Audit Commission does not charge the smallest councils.

But ministers argue that small public bodies should follow procedures adopted by the Charities Commission, which does not require audits of organisations spending below £500,000 a year.

The government, however, has chosen £6.5 million as its benchmark, the same as the annual turnover figure under which companies are exempt from audit. The auditing of public bodies with annual spending above £6.5 million would closely follow practices in the City.

In its consultation paper on the plans, the government says that there are 1,200 public bodies spending less than £1,000 a year. There would be no auditing for these because, it argues, “the risk to public funds is low, and any external examination or audit fees would be disproportionate to their income or expenditure.”

It says that there are 6,400 bodies whose annual expenditure is between £1,000 and £50,000. These would be checked, but not audited, by independent examiners. These examiners would need no qualification.

There are 1,625 authorities, according to the paper, with annual spending of between £50,000 and £250,000. Their accounts would be checked, but not audited, by independent examiners with accountancy qualifications.

And the paper says that there are 675 bodies spending between £250,000 and £6.5 million a year. Their accounts would be checked, but not audited, by independent examiners who need to be qualified auditors.

This means that 9,900 public bodies spending in total every year anywhere between £331.4 million and £1,952 million will go unaudited under the plans by the Department for Communities and Local Government.

Public bodies spending below £6.5 million a year also include parish councils, town councils and internal drainage boards.

The Audit Commission says that out of 131 ‘special interest’ reports, which are published by auditors to expose misuse of public money, 13 were principal local authorities and 85 were parish councils, suggesting that controls may already be too lax. One was a passenger transport authority, and another an internal drainage board.

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