The Audit Commission is cutting audit fee scales for health organisations and probation boards and trusts next year. And inspection fee scales for local authorities will be kept at 2009/10 levels.
Scales for councils, fire authorities and the police will rise by six per cent to pay for additional work arising from the transition to new International Financial Reporting Standards (IFRS). But the Commission will subsidise the one-off costs arising from this move.
The Commission is publishing scales of audit and inspection fees for 2010/11 and indicative fee proposals for 2011/12 and 2012/13. This follows an eight-week consultation with councils and health trusts. View the scales of audit and inspection fees documents from http://www.audit-commission.gov.uk/fees2010.
Steve Bundred, Chief Executive of the Audit Commission, said:
'It's good to be able to announce that for many organisations audit costs will go down next year, and costs won't increase for most bodies. I'm sure that will be welcome with the financial squeeze ahead. The new fees scales reflect views from the consultation.'
The cost of audit is a tiny fraction of what public bodies spend. On average they pay less than 0.05 per cent of their overall spending (0.052 per cent for health bodies and 0.040 per cent in local government). Inspection fees account for 0.005 per cent of councils' spending.
During the consultation, organisations said they appreciated the Commission's action in response to the economic downturn. Many said it should freeze or reduce audit and inspection fees.
The new scales of fees show:
- A net cut in audit fees of 2 per cent at health bodies and 1 per cent at probation boards and trusts. This reflects the lessening cost of the transition to IFRS, which first applied to these bodies in 2009/10.
- No increase for inflation applied to audit and inspection fees or the hourly rates charged by the Commission for certifying grant claims and returns.
- Real-term cuts to the scale fee for large primary care trusts.
- An increase of 6 per cent in fees for local authorities, the police and fire and rescue bodies. This reflects the costs of moving to IFRS, which applies to these bodies for the first time in 2010/11.
Notes for editors
- The Audit Commission consulted 886 audited and inspected bodies and others on the Proposed work programme and scales of fees 2010/11 and indicative fee proposals for 2011/12 and 2012/13, between July and September this year.
- Under Section 7 of the Audit Commission Act 1998 and Section 12 of the Local Government Act 1999, the Commission has a statutory duty to prescribe scales of fees for the audit of accounts, and inspections. Before prescribing any scales of fees we consult audited and inspected bodies, their representative bodies and the accountancy profession. Once the Commission has prescribed a scale of fees, the applicable fee becomes payable by the body.
- The Commission's income must cover the cost of procuring and delivering audits, delivering inspections and related functions including the Comprehensive Area Assessment Lead's role, the programme of national studies, and our other statutory functions including the appointment of auditors and our corporate management costs.
- In setting scales of fees the Audit Commission has a duty to consider: its responsibility to ensure that auditors have appropriate resources to meet their statutory and professional responsibilities; its statutory duties, taking one year with another, to balance expenditure and income for each sector - local government and health; the expectations of government and other stakeholders; and the affordability of any increase.
- Local government pension fund audits were subject to a separate full audit and scale fee for the first time in 2008/09. The Commission has deferred setting the 2010/11 scale fee until the 2008/09 audits have been completed. This will enable the Commission to consider whether the underlying assumptions used in setting the initial scale fee were appropriate.
- IFRS: In recent years, there has been an increase in the demands of professional accounting and auditing standards, and corporate governance requirements. This reflects international harmonisation of professional standards and convergence between the public and private sectors. It has affected the work of auditors significantly and had an impact on costs. In his Budget statement in March 2007, the then Chancellor of the Exchequer announced that all public bodies will prepare their accounts using International Financial Reporting Standards. The requirement is effective from the audit of the accounts of health bodies and probation boards and trusts in 2009/10 and for local government, police authorities and fire and rescue authorities in 2010/11.
- The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.
- Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.
- As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.
For further information, contact Nigel Watts, Media Relations Manager, 0844 798 2129 or 07813 315538.