Scrapping of Audit Commission boosts public sector FDs

The Audit Commission may not have been a popular institution, particularly among public sector FDs, but its existence was an important check and balance of the financial integrity of the public sector bodies it was set up to audit.

So it was with not insignificant surprise that communities minister Eric Pickles announced in a statement issued late last Friday that the Audit Commission would be scrapped, after bemoaning that the corporate centre of the august body had, in his words “lost its way.” 

The commission monitors the accounts and performance of public sector bodies, and employs around 2,000 people, many of them trained accountants. Closing it will save the Exchequer £50m a year, the government claimed.

"Rather than being a watchdog that champions taxpayers' interests, it has become the creature of the Whitehall state. These proposed changes go hand in hand with plans to create an army of armchair auditors - local people able to hold local bodies to account for the way their tax pounds are spent and what that money is delivering."

The announcement is bad news for those commission employees facing redundancy but could spell new opportunties for the private sector, as councils and other bodies will be able to appoint their own independent external auditors "from a more competitive and open market", the Department for Communities and Local Government said in a news announcement.

The announcement will no doubt achieve its dual objectives of decentralising power and saving council taxpayers' money by outsourcing audit expertise to scale back "centrally imposed, bureaucratic and costly inspection and auditing. However views are mixed on the true impact on accountability promised by the new set-up.

A new auditing framework will be developed by the National Audit Office and the wider profession to ensure councils and local health bodies will still be subject to robust auditing, the department added. But talk is cheap but the government must recognise that safeguards are needed to ensure that a reduction in cost does not come at the expense of quality. How will it, for example, avoid the risk that auditors turn a blind eye to financial mismanagement in order to keep work.

Certainly the move is the latest in a gradual shift that has seen public sector finance chiefs step ever closer to their private sector counterparts. From a career perspective, the public sector always used to be seen, fairly or unfairly, as the soft option. As far as headhunters are concerned, that’s no longer the case, particularly as the rigours of public sector cost-cutting have kicked in and the need to adopt a more ‘private sector’ approach to public sector finances has ensued.

But with public sector finance chiefs now facing the joy of audits by private sector firms, one big question remains; how long will it be before the salaries of increasingly pressured finance directors in the public sector reach a par with their private sector counterparts?