The Audit Commission was a statutory corporation in the

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

. The commission's primary objective was to appoint auditors to a range of local public bodies in England, set the standards for auditors and oversee their work. The commission closed on 31 March 2015, with its functions being transferred to the voluntary, not-for-profit or private sector. On 13 August 2010, it was leaked to the media, ahead of an official announcement, that the commission was to be scrapped. In 2009-10 the commission cost the central government £28 million to run, with the remainder of its income coming from audit fees charged to local public bodies.

History

The Audit Commission was established under the

Local Government Finance Act 1982 Local may refer to: Geography and transportation * Local (train), a train serving local traffic demand * Local, Missouri, a community in the United States * Local government, a form of public administration, usually the lowest tier of administra ...

, 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 The National Health Service and Community Care Act 1990 (c 19) introduced an internal market into the supply of healthcare in the United Kingdom, making the state an 'enabler' rather than a supplier of health and social care provision.Health and S ...

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 The rate-capping rebellion was a campaign within English local councils in 1985 which aimed to force the Conservative government of Margaret Thatcher to withdraw powers to restrict the spending of councils. The affected councils were almost all r ...

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 The National Health Service (NHS) is the umbrella term for the publicly funded healthcare systems of the United Kingdom (UK). Since 1948, they have been funded out of general taxation. There are three systems which are referred to using the " ...

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 was transferred to the

Auditor General for Wales The Auditor General for Wales is the public official in charge of the Wales Audit Office, the body responsible for auditing the Welsh Government, its public bodies, National Health Service bodies and local government in Wales. The Auditor General f ...

Westminster Council 'homes-for-votes'

The

gerrymandering In representative democracies, gerrymandering (, originally ) is the political manipulation of electoral district boundaries with the intent to create undue advantage for a party, group, or socioeconomic class within the constituency. The m ...

Homes for votes 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 Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...

. 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.

National Fraud Initiative

Since 1996 the Audit Commission has run the National Fraud Initiative, a UK-wide anti-fraud programme. Between 1996 and 2013 it traced £1.17 billion in fraud, including £215 million in 2008-9, as more councils provided data and most recently £203m in 2012-13.

Closure

On 13 August 2010, the

Secretary of State for Communities and Local Government The secretary of state for levelling up, housing and communities, also referred to as the levelling up secretary, is a secretary of state in the Government of the United Kingdom, responsible for the overall leadership and strategic direction o ...

Eric Pickles Eric Jack Pickles, Baron Pickles, (born 20 April 1952) is a British Conservative Party politician who served as Member of Parliament (MP) for Brentwood and Ongar from 1992 to 2017. He served in David Cameron's Cabinet as Secretary of State for ...

, announced that the commission was to be scrapped, with its functions being transferred to the voluntary, not-for-profit or private sector. The government aimed to save £50m annually, with the commission's function transferred to the

Local Government Ombudsman The Local Government and Social Care Ombudsman, legally the Commission for Local Administration in England and formerly known as the Local Government Ombudsman (LGO), is a service that investigates complaints from the public about councils and som ...

and private accounting firms. Accounting body ACCA expressed doubt that the private sector would match the commission's experience and consistency. The

Financial Reporting Council The Financial Reporting Council (FRC) is an independent regulator in the UK and Ireland based in London Wall in the City of London, responsible for regulating auditors, accountants and actuaries, and setting the UK's Corporate Governance and ...

suggested to a House of Lords committee that government should not sell the Audit Commission's practice to any of the

Big Four auditors The Big Four are the four largest professional services networks in the world, the global accounting networks Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC). The four are often grouped because they are comparable in size r ...

, otherwise their dominance of the audit market would be further enhanced. In 2012 a proposed employee-owned firm won only one of ten regional contracts and was launched as a subsidiary of

Mazars Mazars is a global audit, accounting and consulting group employing more than 42,000 professionals in more than 90 countries through member firms. With head offices in France, Mazars has a network of correspondent partners and joint ventures in ...

Grant Thornton Grant Thornton is the world's seventh-largest by revenue and sixth-largest by number of employees professional services network of independent accounting and consulting member firms which provide assurance, tax and advisory services to private ...

won the largest share, four contracts, and took on about 350 staff from the commission.

KPMG KPMG International Limited (or simply KPMG) is a multinational professional services network, and one of the Big Four accounting organizations. Headquartered in Amstelveen, Netherlands, although incorporated in London, England, KPMG is a net ...

and

Ernst & Young Ernst & Young Global Limited, trade name EY, is a multinational professional services partnership headquartered in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and Pricewat ...

won three and two contracts respectively. The Commission estimated that audit fee savings at 'up to 40%' will arise as a result of these arrangements. A small number of staff were retained at the Audit Commission to monitor these contracts until the commission was abolished. Provision to abolish the commission was included in the

Local Audit and Accountability Act 2014 The Local Audit and Accountability Act 2014 is a United Kingdom act of parliament. Its main provisions: *abolish the Audit Commission and repeal the Audit Commission Act 1998 (section 1) *establish new arrangements for the audit and accountabi ...

, and the commission was formally closed on 31 March 2015.

Function

Functions of the Audit Commission included: * Audit: Auditors appointed by the Audit Commission were responsible for auditing local government in England, National Health Service trusts and other local agencies in

England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe b ...

, covering local government, health, housing, fire and rescue and community safety. * Research: The Audit Commission published studies that analysed and commented upon wide-ranging social and financial issues in the UK. * Data-matching: The National Fraud Initiative compared data from a wide range of sources (including data from UKBA, Local Government, Central Government Departments and the NHS) to help participating organisations discover cases of fraud, overpayment and error. The Audit Commission worked in partnership with – but operated independently of – a number of government departments including the

Department for Communities and Local Government The Department for Levelling Up, Housing and Communities (DLUHC), formerly the Ministry for Housing, Communities and Local Government (MHCLG), is a department of His Majesty's Government responsible for housing, communities, local governme ...

, the Home Office, and the

Department of Health A health department or health ministry is a part of government which focuses on issues related to the general health of the citizenry. Subnational entities, such as states, counties and cities, often also operate a health department of their ow ...

. Previously the commission also produced performance assessments for councils, fire and rescue services, and housing organisations. In July 2009, it launched the Comprehensive Area Assessment, which assessed the effectiveness of local public services.

Funding

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 an 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.

Structure

Chairman and commissioners

The governing board of the Audit Commission was made up of commissioners appointed by the

Department of Communities and Local Government The Department for Levelling Up, Housing and Communities (DLUHC), formerly the Ministry for Housing, Communities and Local Government (MHCLG), is a department of His Majesty's Government responsible for housing, communities, local government i ...

. Previous chairmen included Jeremy Newman, former chief executive of

BDO International BDO (an acronym for Binder Dijker Otte) is an international network of public accounting, tax, consulting and business advisory firms that provide professional services under the name BDO. It is the fifth-largest accounting network in the wor ...

(2008-2011) and Michael O'Higgins (2006-2012), who had for 10 years previously been managing partner of

PA Consulting PA Consulting Group (formerly Personnel Administration) is a professional services firm that works with public, private and third-sector organisations. It was founded in 1943 by Ernest E. Butten, Tom H. Kirkham and Dr David Seymour, who used a n ...

Controller of Audit / Chief Executive

Marcine Waterman took up the post of Controller of Audit in September 2012. Previous incumbents include Eugene Sullivan, Steve Bundred (later of

Monitor Monitor or monitor may refer to: Places * Monitor, Alberta * Monitor, Indiana, town in the United States * Monitor, Kentucky * Monitor, Oregon, unincorporated community in the United States * Monitor, Washington * Monitor, Logan County, West ...

), Sir

John Banham Sir John Michael Middlecott Banham (22 August 1940 – 9 August 2022) was a British businessman. He was the chairman of the major brewer Whitbread from 2000 to 2005, and also chairman of ECI Ventures and Johnson Matthey. Biography Banham w ...

(later of the CBI),

Sir Howard Davies Sir Howard John Davies (born 12 February 1951) is a British economist and author, who is the chairman of NatWest Group and the former director of the London School of Economics. He was the first chairman of the Financial Services Authority. Da ...

(later of the CBI), Bank of England, FSA ( Financial Services Authority) and LSE (

London School of Economics The London School of Economics and Political Science (LSE) is a public university, public research university located in London, England and a constituent college of the federal University of London. Founded in 1895 by Fabian Society members Sidn ...

), and

Sir Andrew Foster Sir Andrew Foster (born 29 December 1944) is a British public servant who was knighted in 2001 for his services to the health and government services.

Criticism and controversy

* The commission had been criticised for its methods, particularly how it rated councils and health organisations.

Liberal Democrat Several political parties from around the world have been called the Liberal Democratic Party or Liberal Democrats. These parties usually follow a liberal democratic ideology. Active parties Former parties See also *Liberal democracy *Lib ...

Vince Cable Sir John Vincent Cable (born 9 May 1943) is a British politician who was Leader of the Liberal Democrats from 2017 to 2019. He was Member of Parliament (MP) for Twickenham from 1997 to 2015 and from 2017 to 2019. He also served in the Cabinet as ...

described the process organisations go through to earn stars as "disrespectful and utterly perverse". * Occupational psychologist

John Seddon John Seddon is a British occupational psychologist and author, specialising in change in the service industry. He is the managing director of Vanguard, a consultancy company he formed in 1985 and the inventor of ' The Vanguard Method'. Vangua ...

called for the commission to be scrapped, which led to what ''

The Times ''The Times'' is a British daily national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its current name on 1 January 1788. ''The Times'' and its sister paper '' The Sunday Times'' (f ...

'' described as a "caustic personal attack" on Seddon from the commission. * In 2009, the commission caused controversy when it published a report into the

2008–2011 Icelandic financial crisis The Icelandic financial crisis was a major economic and political event in Iceland that involved the default of all three of the country's major privately owned commercial banks in late 2008, following their difficulties in refinancing their ...

which accused seven local authorities of acting negligently by depositing £33 million into Icelandic banks a few days before they collapsed in October 2008. The Audit Commission had already stated that it too had deposited £10 million in Icelandic banks in the months leading up to the collapse. * In 2010, Eric Pickles and Bob Neill accused the Commission of "shocking excess" in its expenditure, such as hiring external venues for staff training. Michael O'Higgins, the commission's chairman, defended the expenditure on

BBC Radio 4 BBC Radio 4 is a British national radio station owned and operated by the BBC that replaced the BBC Home Service in 1967. It broadcasts a wide variety of spoken-word programmes, including news, drama, comedy, science and history from the BBC' ...

's ''Today'' programme. * One of the features of the criticism of the Audit Commission was an apparent campaign carried out in the press. On 3 November 2010, newspapers carried articles about alleged extravagant spending by the Audit Commission after its abolition was announced.

References

External links

Audit Commission website

House of Commons Library Briefing Paper
{{Authority control

Defunct public bodies of the United Kingdom Department for Levelling Up, Housing and Communities Auditing in the United Kingdom