Audit Commission claims 40% audit fee savings after naming winning firms in procurement

Audit fees for most local public bodies could fall by as much as 40% – or £250m in total – over the next five years, the Audit Commission claimed today as it announced the results of its outsourcing procurement.

Grant Thornton won the greatest share of the contracts, worth a notional £41.3m a year over the five-year period. The firm will cover the North-West, West Midlands, London (South) Surrey & Kent, and South West.

The other successful firms were:

• KPMG, which won contracts worth £23.1m a year for Humberside & Yorkshire, East Midlands, and London (North);
• Ernst & Young, which won contracts worth £20m a year for the Eastern and South East areas; and
• DA Partnership (a subsidiary of Mazars), which was awarded a £5m a year contract for the North East & North Yorkshire.

The contracts will start from 2012/13. The standstill period for the procurement ends at 23.59 today (5 November).

The Audit Commission said public bodies were expected to save more than £30m a year for the length of the contracts. It arrived at the £250m figure by adding these savings with an additional £19m a year secured through its own internal efficiencies.

The watchdog claimed that the procurement exercise had diversified the marketplace, by bringing in two new suppliers. The Audit Commission’s own audit practice will end in October this year.

Michael O'Higgins, Chairman of the Audit Commission, said: “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.

“Its outcome will promote a skilled, well-resourced and diverse public audit market. Only the Audit Commission could have delivered this, given its statutory powers and unique audit procurement arrangements.”

O’Higgins claimed that the procurement process had also ensured that the specialised skills and experience of more than 700 public sector auditors would be retained.

He added: “I am glad to see the cost benefits of bulk-buying audit services and prices being locked in for at least five years - these £250m 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.”

The transfer of auditors to Grant Thornton and the other successful companies will take place in the autumn of 2012, once their work on accounts for the 2011/12 financial year is completed.

The closure of the Audit Commission's audit practice closes will mean a much smaller organisation is left to manage the contracts, oversee the public audit market and deliver its other statutory functions.

Ministers are expected to publish a draft Bill on the future arrangements for local public audit for legislative scrutiny and consultation in the spring.

The Audit Commission said its current contracts with Deloitte, Grant Thornton UK, KPMG, PricewaterhouseCoopers, and PKF would remain in place.