|Logo of the Audit Commission|
|Formed||1 April 1983|
|Headquarters||1st Floor Millbank Tower
London SW1P 4HQ
|Motto||Protecting the public purse|
|Annual budget||£213m (2009-10)|
The Audit Commission is a public corporation in the United Kingdom. The Commission’s primary objective is to improve economy, efficiency and effectiveness in local government, housing and the health service, directly through the audit and inspection process and also through value for money studies.
On 13 August 2010, it was leaked to the media, ahead of an official announcement, that the Commission is to be scrapped, with its functions being transferred to the voluntary, not-for-profit or private sector. 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.
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 (with the Social Services Inspectorate of the Department of Health), and in 1997, reviews of local education authorities (LEAs) jointly with OFSTED.
On 1 April 2005 the Commission's remit in Wales transferred to the Auditor General for Wales.
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.
Since 1996 the Audit Commission has run the National Fraud Initiative, a UK-wide anti-fraud programme. Between 1996 and 2009 it traced £664m in fraud, including £215m in 2008-9, as more councils provided data.
On 13 August 2010, the Secretary of State for Communities and Local Government, Eric Pickles, announced that the Commission is to be scrapped, with its functions being transferred to the voluntary, not-for-profit or private sector. The government aims to save £50m annually, with the Commission's function transferred to local council ombudsmen and private accounting firms. Options for the future include forming a mutual organisation for local authority audit and a new consultancy for housing inspection. 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 the proposed employee-owned firm won only one of ten regional contracts, and is to be launched as a subsidiary of Mazars. Grant Thornton won the largest share, 4 contracts, and will take on about 300 staff from the Commission. KPMG and Ernst & Young won 3 and 2 contracts respectively. The Commission estimated audit fee savings at 'up to 40%'. A small service is being retained in the public sector to award and monitor contracts.
The Audit Commission works in partnership with, but operates independently of, a number of Government Departments including the Department for Communities and Local Government, the Home Office, and the Department of Health.
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% (£28.0m) 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.
The governing board of the Audit Commission is made up of Commissioners appointed by the Department of Communities and Local Government. Since October 2006 their chairman has been Michael O'Higgins, who had for 10 years previously been managing partner of PA Consulting.
The Chief Executive of the Audit Commission is responsible for the day-to-day running of the organisation. The Commission is in the process of selecting a new Chief Executive following the departure of Steve Bundred (now of Monitor) in March 2010. He has been succeeded on an interim basis by Eugene Sullivan, managing director of corporate services at the Commission.
Previous Heads have included Sir John Banham (later of the CBI), Sir Howard Davies (later of the CBI), Bank of England, FSA (Financial Services Authority) and LSE (London School of Economics), and Sir Andrew Foster.
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