LGA demands greater Audit Commission rebate for councils

The Local Government Association (LGA) has called on the Audit Commission to return all of the £26.8m surplus it has accrued from charging councils for audit and inspection after it emerged that a large portion of the money is being withheld by the Audit Commission to pay for the cost of closing down its business activity.

Under proposals set out in the Audit Commission’s consultation on its proposed work programme and fee structure following the announcement of its abolition and that of the Comprehensive Area Assessment (CAA), the Commission is planning to offer a rebate on the 2010/11 fees paid by councils. District councils will get back 1.5 per cent of their fee, while single tier and county councils will receive a 3.5 per cent rebate. Further reductions are proposed for 2011/12.

However, the LGA called for all of the surplus to be returned to councils, argusing that it was not for local authorities to subsidise the cost of winding up the organisation.

Cllr David Parsons, Chairman of the LGA Improvement Programme Board, said: “It is entirely wrong for a non-profit organisation like the Audit Commission to treat surplus fees as a revenue stream to off-set the cost of abolishing CAAs and the Commission. It is not councils’ responsibility to help a national organisation meet the costs of its own restructuring.

“Councils are entitled to a full rebate of the £26.8m surplus the Audit Commission holds as a result of the audit and inspection fees which they have paid.”

In response, the Audit Commission’s chief executive Eugene Sullivan said there would be no reserves left at the end of this financial year and the Department for Communities and Local Government would meet any outstanding liabilities relating to redundancy and premises that cannot be covered by the reserves.

He added: “The Audit Commission board will be considering responses to its consultation about fees for 2011/12 at a meeting on 15 February. The consultation proposes that the 2011/12 scales of audit fees are based only on what the Commission needs in order to recover the costs of audits and its other activities in 2011/12. This would result in a saving of £6.3m for councils in that financial year.”

Sullivan said the Commission had already announced that councils would receive a £7m rebate this financial year. “But the costs of abolition have to come from the public purse and the remainder of the Audit Commission’s reserves will contribute to meeting some of those costs,” he added.