The UK Audit Commission, which is responsible for checking the efficiency of 11,000 public sector bodies, will be scrapped and its functions transferred to the voluntary, not-for-profit or private sector.
The Audit Commission will close by 2012 and will save £50m a year, according to Communities Secretary Eric Pickles.
The watchdog, which employs 2,000 people, was set up in 1983. Its primary objective was to improve economy, efficiency and effectiveness in local government, housing and the health service.
Association of Chartered Certified Accountants public sector head Gillian Fawcett warned the abolition of the commission would mean the loss of the best practice benchmark for public sector officers and costly future investigations by “armchair auditors” that may not benefit the public.
“Going forward, there needs to be some form of co-ordinating structure which replaces the commission and which avoids a post code lottery when it comes to public audit,” Fawcett said.
The commission’s chairman Michael O’Higgins said there are a range of options for the future of the audit practice, including sale, a management buyout, and the setting up of a mutual organisation.
“It is critically important that during the coming period of uncertainty, and the transition period, that we ensure local accountability, and the accurate audit of public spending, is carried out effectively,” O’Higgins said.
Criticising the decision to scrap the commission, shadow secretary of state for local government John Denham said taxpayers would be without coherent information about how much value for money their local services provided.