25 March 2014

So, at last, we know the next stage in the demise – not of the Audit Commission, which will be abolished at the end of March next year – but of the Audit Commission’s work.

The commission itself is being scrapped – a mere three years later than originally intended – in favour of the big, bad, idea that councils and other public bodies should appoint their own auditors. This, as the Institute for Government noted in its recent study Dying to Improve, overturns a longstanding principle that really ought to be preserved – that the audit of the public money, and of how effectively it is being spent, should be as independent as possible.

The commission did that, and for the next year it still will. It appoints the auditor to local authorities and to almost 11,000 other public bodies in England, including the police, fire, significant chunks of the NHS. It stands behind the auditors, statutorily and financially, if they get into dispute with a council or another body over the way they have spent public money, and it stands behind the council if any auditor is trying improperly to rack up their fees.

But while the commission is disappearing (just weeks before the May 2015 election in a piece of timing that seems deliberately designed to prevent an incoming government having easy second thoughts) its existing contracts for the audit of these bodies run on until at least 2017 and quite possibly until 2020.

So an interim “transitional” body is needed to oversee these contracts until they run out and the happy day arrives – for those who believe self-appointment of auditors is a feather in the cap of “localism” – or the unhappy day arrives - for those who believe the audit of public money should be as robustly independent as possible - and councils, through a somewhat cumbersome new mechanism, choose their own auditors.

The government’s solution, announced at the end of last week, is to allow the Local Government Association to set up a private, independent company, to run the audits for the two to five years needed before the contracts expire.

This does not feel like a happy arrangement. The LGA does much good work and has over time got a lot better at itself being an organisation that seeks to drive improvement in local government. But at the end of the day, the LGA is a private member’s club. It cannot compel the recalcitrant whereas the Audit Commission could.

The new, as yet unnamed, company does offer a route, for those who want to take it, for the continued collective procurement of audit post 2017 or 2020 – collective procurement being one of the Audit Commission’s strengths. But it will be a private company owned by a private member’s club, not a statutorily independent public body protecting the public purse.

The alternatives for the “transitional arrangements”, it is understood, were for the Crown Commercial Service to have taken on the contracts, or for the communities’ department itself to have run them. Either might have made it marginally easier for an incoming government of whatever colour to have the second thoughts needed, and re-create this essential part of the Audit Commission’s functions.

Now, if an incoming government chooses to do that, it will appear to be “nationalising” a private arrangement, even if it is one that plainly does not offer the same protection to the public purse that the Audit Commission did. That should not deter it. The next government has a couple of year in which to put this mess right.