Thousands of public bodies to escape scrutiny of their expenditure
By David Hencke | 7 July 2011
“The current arrangements for local audit… are inefficient and unnecessarily centralised” – Grant Shapps, housing and local government minister
Up to £2 billion of public expenditure is to become exempt from audit next year under radical reforms proposed by the government.
Exaro has uncovered the figure following the decision by Eric Pickles, communities and local government secretary, to abolish the Audit Commission.
The proposed changes to the auditing of local government means that 8,700 public bodies with annual expenditure between £1,000 and £6.5 million would be checked – but not audited – by independent examiners. An audit includes checking all invoices and expenditure.
Another 1,200 public bodies spending less than £1,000 a year would not be checked at all.
Research by Exaro has revealed that the total unaudited annual spend of these 9,900 public bodies could top £1,952 million, and will, at the minimum, be £331 million. Under the plans, the initial annual expenditure escaping audit will be somewhere between those two figures, but it could rise in subsequent years to the maximum.
The remaining 353 local authorities and 215 other public bodies – including fire and rescue authorities, national parks and conservation boards – that have an annual spend above £6.5 million would appoint their own auditors as private companies do. These auditors would be able to undertake other work for the same public bodies, raising the potential for conflicts of interest. The auditing of local government would closely follow practices in the City.
And councils face extra costs because they would have to pay to indemnify new auditors and set up independent audit committees.
Meanwhile, the 150-year-old public right to demand that an auditor launch an investigation into suspected unlawful activity or waste of public money will be abolished under the plans.
The Department for Communities and Local Government (DCLG) is about to publish a draft bill after examining responses to a consultation exercise on its proposals. The government’s aim is for changes to come into effect in April 2012.
The Audit Commission, however, is sceptical about this date, saying in a paper to the House of Commons communities and local government committee: “We understand the timetable for the necessary legislation to abolish the commission, and put in place a new local audit framework, means we are likely to keep some powers until at least December 2013.”
Grant Shapps, housing and local government minister, says in his forward to the consultation paper: “The current arrangements for local audit, whereby a single organisation – the Audit Commission – is the regulator, commissioner and provider of local audit services are inefficient and unnecessarily centralised.”
“We want to put in place a new locally focussed audit regime, which is open and transparent but retains the high quality of audit that we expect.”
However, the parliamentary communities and local government committee today published a report revealing the costs of abolishing the Audit Commission.
Plans for replacing the Audit Commission’s role in auditing health and police bodies are yet to be finalised.