Introduction to the fee scale
PSAA’s remit
PSAA is specified under the Local Audit and Accountability Act 2014 and the Local Audit (Appointing Person) Regulations 2015 as the appointing person for principal local government bodies in England.
We are responsible for providing an auditor appointment scheme for eligible bodies which choose to opt in. This involves procuring and managing contracts with audit firms for the provision of audit services.
PSAA’s specific remit under the regulations is to:
- appoint an auditor to all bodies that have chosen to opt into the scheme rather than appoint their own auditor;
- set a scale or scales of fees; and
- monitor independence and contractual compliance of the audit firms it appoints.
Audit scope
PSAA does not control the scope or timescale of the local audit work auditors undertake:
- the National Audit Office publishes the statutory Code of Audit Practice (the Code) for auditors of local public bodies, which sets out what local auditors are required to do to fulfil their statutory responsibilities under the Local Audit and Accountability Act 2014. The 2024 Code came into force in November 2024, replacing the 2020 Code;
- CIPFA/LASAAC sets financial reporting requirements for local government bodies in the Code of Practice on Local Authority Accounting; and
- the Financial Reporting Council is responsible for regulating audit quality.
The Code of Audit Practice requires the auditor to:
- use their professional judgement to apply the principles and requirements set out in the Code to the particular circumstances that exist at each body;
- ensure their work is designed to meet the auditor’s statutory responsibilities, applying the auditor’s professional judgement to tailor their work to the circumstances in place and the audit risks to which they give rise; and
- comply with auditing standards currently in force in the United Kingdom, as may be amended from time to time, having regard to any other guidance issued by a relevant regulatory body, and statutory guidance issued by the NAO.
Our contracts with audit firms require auditors to undertake audits that comply with the requirements of the Code of Audit Practice. Once appointed auditors exercise their statutory and professional responsibilities independently of PSAA, by design of the local audit framework.
The Accounts and Audit (Amendment) Regulations 2024 took effect on 30 September 2024 and now set the timescales under which audit work should be completed up to 31 March 2028. There has previously been no statutory deadline for local audit completions.
Audit fees
The Local Audit (Appointing Person) Regulations 2015 and the Local Audit (Appointing Person) (Amendment) Regulations 2022 require that PSAA must specify the scale or scales of fees for the audit of the accounts of opted-in authorities before 1 December of the financial year to which the fee scale relates. A fee scale cannot be amended after this date.
Where we are not able to determine the impact of changes in audit requirements at the time we set the fee scale, the fee variations process provides the mechanism to adjust fees for increases or decreases in the audit work required. Where more work is needed, the total fee will be higher, where less work is needed a negative fee variation applies. If these adjustments are expected to be permanent, we consolidate them into a future fee scale.
The total audit fee for an individual opted-in body is driven by the circumstances and audit risks of the body and by the volume and nature of the work needed for an auditor to deliver a Code-compliant audit. This will be determined by a combination of local factors and the accounting, auditing and regulatory requirements which are determined nationally.
The total audit fee for an opted-in body is a combination of:
- the scale fee, which is based on the information available to us at the time we set the fee scale; and
- fee variations, which are based on our assessment and challenge of the information provided by an auditor about why they have had to do more/less work than expected.
The 2024/25 fee scale consultation
Our consultation explained the proposed elements of the 2024/25 fee scale, comprising:
- the scale fees set for 2023/24;
- additional fees for changes in audit requirements;
- adjustments for specific bodies, where updated information is now available; and
- a contractual adjustment of 3.4% for inflation.
We also wrote to bodies during the consultation period to set out the calculation of their expected scale fee based on these elements.
We received 128 substantive responses to the consultation (25% of consultees), with 124 responses (97%) from bodies and 4 (3%) from other stakeholders. 53% of consultation responses confirm they agree with our proposals and 47% do not agree. Most responses also raise concerns about aspects of the proposed fee scale.
Many of the issues raised are complex and typically call for action outside our statutory remit. For example, we cannot change the scope of local audits, direct auditors on the amount or timing of their work, or secure additional funding for higher fees. We have long stated our view that local audit work needs to be more focused on the sector’s needs.
A summary of the responses to the consultation is available on our website. We welcome the feedback provided and thank those who responded.