Audit Commission
Encyclopedia
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.
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
.
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.
, 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.
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.
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 are carried out by five private audit firms.
) 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.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
.
The Commission’s primary objective is to improve economy, efficiency and effectiveness in local government, housing and the health service, directly through the audit
Audit
The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...
and inspection
Inspection
An inspection is, most generally, an organized examination or formal evaluation exercise. In engineering activities inspection involves the measurements, tests, and gauges applied to certain characteristics in regard to an object or activity...
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.
History
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 rebellionRate-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 run by left-wing Labour Party leaderships...
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
National Health Service
The National Health Service is the shared name of three of the four publicly funded healthcare systems in the United Kingdom. They provide a comprehensive range of health services, the vast majority of which are free at the point of use to residents of the United Kingdom...
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
Ofsted
The Office for Standards in Education, Children's Services and Skills is the non-ministerial government department of Her Majesty's Chief Inspector of Schools In England ....
.
On 1 April 2005 the Commission's remit in Wales transferred to the Auditor General for Wales
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 Assembly Government, its public bodies, National Health Service bodies and local government in Wales...
.
Westminster Council 'homes-for-votes'
The gerrymanderingGerrymandering
In the process of setting electoral districts, gerrymandering is a practice that attempts to establish a political advantage for a particular party or group by manipulating geographic boundaries to create partisan, incumbent-protected districts...
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
Shirley Porter
Dame Shirley Porter, Lady Porter, DBE, is a former Conservative leader of Westminster City Council in London and a prominent philanthropist in Israel and the UK. She is the daughter and heir of Sir Jack Cohen, the founder of Tesco supermarkets...
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 2009 it traced £664m in fraud, including £215m in 2008-9, as more councils provided data.Closure
On 13 August 2010, the Secretary of State for Communities and Local GovernmentSecretary of State for Communities and Local Government
The Secretary of State for Communities and Local Government, is a Cabinet position heading the UK's Department for Communities and Local Government....
, Eric Pickles
Eric Pickles
Eric Jack Pickles is a British Conservative Party politician. Pickles was appointed Secretary of State for Communities and Local Government of the coalition government headed by Prime Minister David Cameron on 12 May 2010....
, 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
Association of Chartered Certified Accountants
Founded in 1904, the Association of Chartered Certified Accountants is the global body for professional accountants offering the Chartered Certified Accountant qualification . it is one of the largest and fastest-growing global accountancy bodies with 147,000 members and 424,000 students in 170...
expressed doubt that the private sector would match the commission’s experience and consistency.
The Financial Reporting Council
Financial Reporting Council
The Financial Reporting Council is the UK's independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.-Structure:...
suggested to a House of Lords committee that Government should not sell the Audit Commission's practice to any of the Big Four auditors
Big Four auditors
The Big Four are the four largest international professional services networks in accountancy and professional services, which handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly in auditing large companies...
, otherwise their dominance of the audit market would be further enhanced.
Function
- Audit: Auditors appointed by the Audit Commission are responsible for auditing local government in England, National Health Service TrustsNHS TrustA National Health Service trust provides services on behalf of the National Health Service in England and NHS Wales.The trusts are not trusts in the legal sense but are in effect public sector corporations. Each trust is headed by a board consisting of executive and non-executive directors, and is...
and other local agencies in EnglandEnglandEngland is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
, covering local government, health, housing, fire and rescue and community safety. - Assessment: The Commission produces performance assessments for councils, fire and rescue services, and housing organisations. In July 2009, they launched a new Comprehensive Area AssessmentComprehensive Area AssessmentComprehensive Area Assessment, or CAA, is a new way of assessing local public services in England that was introduced by the Government in April 2009...
- a new way to assess local public services. - Research: The Audit Commission publish studies which analyse and comment upon wide ranging social and financial issues in the UK.
- Data-matching: The National Fraud Initiative compares data from a wide range of sources (including data from UKBA, Local Government, Central Government Departments and the NHS) to help the participating organisations discover cases of fraud, overpayment and error.
The Audit Commission works in partnership with, but operates independently of, a number of Government Departments including the Department for Communities and Local Government
Department for Communities and Local Government
The Department for Communities and Local Government is the UK Government department for communities and local government in England. It was established in May 2006 and is the successor to the Office of the Deputy Prime Minister, established in 2001...
, the Home Office
Home Office
The Home Office is the United Kingdom government department responsible for immigration control, security, and order. As such it is responsible for the police, UK Border Agency, and the Security Service . It is also in charge of government policy on security-related issues such as drugs,...
, and the Department of Health.
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 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 are carried out by five private audit firms.
Chairman and commissioners
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.Chief Executive
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 MonitorMonitor (NHS)
Monitor, also known as the Independent Regulator for NHS Foundation Trusts, is a non-departmental public body in the United Kingdom. Its purpose is to regulate NHS Foundation Trusts or Foundation Hospitals - hospitals that have opted out of direct governmental control. The body was established in...
) 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
John Banham
Sir John Banham is a British business leader. He has been the chairman of Whitbread, a major brewer since 2000, and is also chairman of ECI Ventures and Johnson Matthey.- Biography :...
(later of the CBI
Confederation of British Industry
The Confederation of British Industry is a British not for profit organisation incorporated by Royal charter which promotes the interests of its members, some 200,000 British businesses, a figure which includes some 80% of FTSE 100 companies and around 50% of FTSE 350 companies.-Role:The CBI works...
), Sir Howard Davies
Howard Davies (LSE)
Sir Howard Davies is a British economist. Davies served as Director of the London School of Economics and Political Science from 2003 to May 2011, having decided to resign from the position on 3 March 2011 following concern over the institution's decision to accept funding from a foundation...
(later of the CBI), Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, FSA (Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
) and LSE (London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...
), and Sir Andrew Foster.
Criticism and controversy
- The Commission has been criticised for its methods, particularly how it rates councils and health organisations. Liberal Democrat MP Vince Cable described the process organisations go through to earn stars as "disrespectful and utterly perverse".
- Management consultant John SeddonJohn SeddonJohn Seddon is a British occupational psychologist, author and "management guru", specialising in the service industry. He is lead consultant of Vanguard, a consultancy company he formed in 1985 and the inventor of 'The Vanguard Method'....
called for the Commission to be scrapped, which led to what The TimesThe TimesThe Times is a British daily national newspaper, first published in London in 1785 under the title The Daily Universal Register . The Times and its sister paper The Sunday Times are published by Times Newspapers Limited, a subsidiary since 1981 of News International...
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 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 NeillBob NeillRobert James MacGillivray "Bob" Neill is a British barrister and Conservative Party politician. He has served as the Member of Parliament for Bromley and Chislehurst since a by-election on 29 June 2006...
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's Today programme.
- One of the features of the criticism of the Audit Commission has been an apparent campaign carried out in the press. On 3 November, newspapers carried articles about alleged extravagant spending by the Audit Commission, after its abolition was announced.
- One of the enduring myths promulgated in the press is that the Audit Commission sent staff on a "jolly" to the races where as the reason for the event was to provide guidance to local government finance officers on issues that might arise during audit. Indeed a key aim was to reduce audit costs. It is, in fact, common practice for public sector bodies to make use of conference facilities at sporting venues when no sporting events are taking place as these often provide excellent value for money compared to city centre locations.
- The claims in the press have alreay been refuted by the Chair of the Audit Commission in the same paper months earlier.
See also
- National Audit Office (United Kingdom)National Audit Office (United Kingdom)The National Audit Office is an independent Parliamentary body in the United Kingdom which is responsible for auditing central government departments, government agencies and non-departmental public bodies...
- Wales Audit OfficeWales Audit OfficeThe Wales Audit Office is an independent public body which was established by the National Assembly for Wales on 1 April 2005. It has overall responsibility for auditing on behalf of the Auditor General for Wales, across all sectors of government in Wales, except those reserved to the UK...
- Audit ScotlandAudit ScotlandAudit Scotland is an independent public body in Scotland which was established in 2000 and is responsible for auditing most of Scotland's public organisations. These include the Scottish Government, local councils and NHS Scotland....
- Northern Ireland Audit Office
- Care Quality CommissionCare Quality CommissionThe Care Quality Commission is a non-departmental public body of the United Kingdom government established in 2009 to regulate and inspect health and social care services in England. This includes services provided by the NHS, local authorities, private companies and voluntary organisations -...
- Her Majesty's Inspectorate of ConstabularyHer Majesty's Inspectorate of ConstabularyHer Majesty's Inspectorate of Constabulary and Her Majesty's Inspectorate of Constabulary for Scotland in the United Kingdom have statutory responsibility for the inspection of police forces.-England and Wales:...
- Her Majesty's Inspectorate of Prisons
- Her Majesty's Inspectorate of Probation
- OfstedOfstedThe Office for Standards in Education, Children's Services and Skills is the non-ministerial government department of Her Majesty's Chief Inspector of Schools In England ....
Further reading
- Roper, I., Higgins, P., James, P. (2007), "Shaping the bargaining agenda. The Audit Commission and public service reform in British local government", International Journal of Human Resource Management 18 (9), pp. 1589–1607
- Kelly, J. (2003), "The Audit Commission guiding, steering and regulating local government", Public Administration 81 (3), pp. 459–476
- Humphrey, J.C. (2002), "A scientific approach to politics? On the trail of the Audit Commission", Critical Perspectives on Accounting 13 (1), pp. 39–62
- Boyne, G. (1997), "Comparing the performance of local authorities: An evaluation of the audit commission indicators", Local Government Studies 23 (4), pp. 17–43