THREE LARGE FIRMS have picked up the remaining local government audit work to be parcelled out to the private sector following the closure of the Audit Commission’s practice.
Contracts have been awarded to KPMG, EY and BDO following the retendering of 30% of the commission’s principal audits, having outsourced the work of its in-house audit practice in 2012, covering 70% of the commission’s audit regime.
BDO won contracts to the value of £4.6m, EY picked up audit work worth £9.6m a year and KPMG was awarded contracts to the value of £9.6m a year.
The Audit Commission said it expects a further reduction of up to 25% for annual audit fees paid by all local public bodies starting from 2015/16.
The prices achieved from the 2012 procurement exercise, combined with savings from discontinuing some areas of work and from improved internal efficiencies, allowed the commission to reduce audit fees charged to audit bodies by 40% from 2012/13.
The savings from both procurement exercises could result in savings to local bodies in the region of £440m, should the government decide to extend all the audit contracts by a further three years to 2020.
Audit Commission chairman Jeremy Newman [pictured] said: “The benefits of centrally procuring, or put another way ‘bulk-buying’, audit services is easy to see. It is gratifying to know that the savings that we will pass on to our audited bodies by reducing audit fees will assist public authorities with their financial challenges.
“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.”
Under the new audit framework introduced by the Local Audit and Accountability Act 2014, councils and local health bodies will procure and appoint their own auditors. The Audit Commission has the statutory power to centrally procure audit services for local public bodies across England. Its market power as a central procurement and appointment body allows it to secure very competitive prices.
Following the end of the procurement process, there will be a consultation period with audited bodies on the appointment of auditors. The appointments will be put to the Commission’s board for approval in December 2014.
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