Audit Commission outsourcing to save £250 million

6 March 2012

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6 March 2012 | Rebecca Ellinor

Savings of £250 million are expected over the next five years as a result of a plan to outsource the work of the Audit Commission.

The body yesterday announced the proposed award of five-year audit contracts to four private firms starting from 2012/13. It expects to confirm the award of the contracts at noon today.

The deals are expected to contribute to an up to 40 per cent cut in the audit fees paid by local public bodies. It 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.

Following a process that began with a contract notice in September 2011, the Audit Commission is proposing to award the following contracts to:

● Grant Thornton (UK) LLP - a total notional value (based on the scale of proposed feed for 2012/13) 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 - £23.1 million a year covering three areas in Humberside & Yorkshire, East Midlands, and London (North);

  • ● Ernst & Young LLP - £20 million a year covering two contract areas - Eastern and South East; and

  • ● DA Partnership Ltd - £5 million a year covering North East & North Yorkshire.

Communities secretary Eric Pickles announced in 2010 that the Audit Commission was to close to save £50 million a year. October 2012 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. As part of plans to outsource the work, 700 auditors will transfer to the private sector.

Audit Commission chairman Michael O’Higgins, said in a statement yesterday: “This procurement has been the result of a rigorous assessment of each bidder against published cost and quality criteria, and will mean significant audit fee savings for local councils, NHS trusts and other local bodies. The process has ensured the specialised skills and experience of more than 700 public sector auditors will be retained in an outsourced market.

“I am glad to see the cost benefits of bulk-buying audit services and prices being locked in for at least five years - these £250 million savings will be passed on to local public bodies when we announce the detail of fee reductions in April. We will continue to spread the cost of audit across all local public bodies, ensuring that smaller and geographically remote public bodies enjoy the benefits of the low prices this procurement has secured.”

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