Communities Secretary Eric Pickles announced that the Audit Commission will outsource all its in-house local public audit work to the private sector in the next financial year.
The Commission has already been asked to begin substantive preparations for outsourcing. The contracts, which start from 2012/13, are expected to run for three or five years - giving local councils and other public bodies the time to plan for appointing their own auditors.
A competitive procurement process will be run that would give suitable private sector bidders the chance to compete for the Commission's audit work in a way that aims to give taxpayers best value for money.
This option would also allow for the possibility of a bid on behalf of the staff of the Audit Commission, which could then form the basis for an employee owned company. Arrangements are in place to ensure such a bid does not have an unfair advantage.
The Commission will radically reduce in size by the end of next year as a consequence of outsourcing its audit work. Prior to primary legislation being enacted, a small residual body will remain to oversee the contracts and make audit appointments. The Commission's inspection work and Comprehensive Areas Assessments has already ended.
The consultation on proposals for a new audit framework closed on 30 June 2011. Ministers are considering the proposals in light of the consultation responses received and the Government will bring forward primary legislation in due course. Once established, the Audit Commission would be formally disbanded and local public bodies would appoint their own auditors.