5 Mar 2012

Private auditors predicted to 'cut costs by 40%'

Public body The Audit Commission has announced the provisional winners of its 10 outsourced regional contracts, which is predicted to bring savings of 'up to 40%'

DA Partnership, the proposed employee-owned spin-off arm from the Audit Commission, won only one contract and will now launch as a wholly-owned subsidiary of Mazars. It will take on the north east and north Yorkshire contract as Mazars DA.

Grant Thornton has been appointed on four contracts with a total estimated value of £41.3m. The mid-sized firm will take on about 300 former staff from the Commission.

The Audit Commission will retain a small stable of staff to oversee the contracts, but most of its former staff will transfer to the contract winners.

Of the Big Four only Ernst & Young and KPMG were awarded any of the regional contracts.

Staff at the Commission agreed last week to end industrial action over the transfer of staff to the private sector. An ‘reasonable compromise’ was agreed between the government and the Prospect Union after more than 500 staff were involved in the action.

The Commission's chief executive, Eugene Sullivan said awarding contracts to the private sector was a "pivotal point" in the history of public service. "We will be losing a distinctive, and publicly-owned, local public audit service and its district auditors who have helped to protect the public purse effectively for over a hundred and fifty years," he said.

Gareth Davies, the former head of the Audit Commission's practice who led the bid from the DA partnership, said it had not achieved the "dream of a mutual audit practice".

Davies will join Mazars as head of public services to lead the new venture, along with a team of former Audit Commission advisors led by Mark Fletcher.

Proposed contract awards are:
• Grant Thornton, a total notional of £41.3m a year covering four contract areas in the North West, West Midlands, London (South) Surrey & Kent, and South West
• KPMG a total notional value of £23.1m a year covering three contract areas in Humberside & Yorkshire, East Midlands, and London (North)
• Ernst & Young LLP a total notional value of £20m a year covering two contract areas in Eastern and South East
• DA Partnership Ltd a total notional value of £5m a year covering one contract area in the North East & North Yorkshire.

The government says that there will be an expected £250m – circa  40% – fall in audit fees for most local public bodies over five years.


Helen Roxburgh