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Private firms named for Audit Commission contracts

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Private firms named for Audit Commission contracts

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Published by Julien Tremblin for 24dash.com in Housing and also in Local Government

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The Audit Commission has named the four private firms which are set to replace the Commission's own Audit Practice.

The Commission proposes to award five-year contracts to Grant Thornton, KPMG, Ernst & Young and DA Partnership – each valued between £5 million and £42 million per year.

The Audit Commission claims that outsourcing the work of its Audit Practice means public bodies can expect to save over £30 million a year for the length of the contracts.

Together with additional savings of £19 million a year achieved through the Commission’s “own internal efficiencies”, the audit fees for local public bodies are expected to fall by 40 per cent over five years.

However, the move has attracted criticism over the risk of increased costs from the "big four" commercial auditors. The announced savings of up to £50 million a year have also been disputed.

This will be the first time in the 28-year history of the Commission that all audits of the accounts of public bodies in England will be carried out by private firms.

The shift will begin in October and will mark an end to the Commission’s own Audit Practice which currently delivers around 70 per cent of the audits for England’s local public services.

The procurement, the Audit Commission says, will safeguard the public sector experience of over 700 auditors who will transfer to the private sector.

Appointments for 2012/13 will commence on 1 September, with Audit Commission staff transferring to the new suppliers on 31 October 2012.

The plans were first announced In August 2010 by the Department for Communities and Local Government (DCLG). The Commission now expects to confirm the award of the contracts tomorrow.

When the Commission’s Audit Practice closes, it will leave a much smaller organisation in place to manage the contracts, oversee the public audit market and deliver its other statutory functions.

Chief Executive Eugene Sullivan said he was pleased with the outcome but warns that the public service is losing a long-standing ally.

He said: “But we should also acknowledge that this is a pivotal point in the history of public service. We will be losing a distinctive, and publicly-owned, local public audit service and its District Auditors who have helped to protect the public purse effectively for over a hundred and fifty years.”

Housing minister Grant Shapps said:

"Today marks another step on the road to replacing the Audit Commission with a more streamlined and competitive local audit system that increases town-hall transparency and the accountability of councils to local citizens.

"The potential savings of £250 million with 40 per cent fee reductions for councils show that our decision to outsource the Audit Commission's in-house practice was the right one."

The contracts are:

  • Grant Thornton (UK) LLP - a total notional value* of £41.3 million a year covering four contract areas in the North West, West Midlands, London (South) Surrey & Kent, and South West;
  • KPMG LLP -  a total notional value of £23.1 million a year covering three contract areas in Humberside & Yorkshire, East Midlands, and London (North);
  • Ernst & Young LLP - a total notional value of £20 million a year covering two contract areas in Eastern and South East;
  • DA Partnership Ltd - a total notional value of £5 million a year covering one contract area in the North East & North Yorkshire.

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