Consultation outcome
We received 128 substantive responses to the consultation (25% of consultees), with 124 responses (97%) from opted-in bodies and 4 (3%) from national stakeholders. Of those who expressed a view, 53% confirm they agree on balance with our proposals and 47% do not agree.
Overall consultation response
| Support the proposed fee scale without reservations | Support the proposed fee scale with reservations | Total YES Agree with proposals | Total NO Do not agree | ||||
|---|---|---|---|---|---|---|---|
| Number | % of total responses | Number | % of total responses | Number | % of responses | Number | % of responses |
| 10 | 8% | 56 | 44% | 66 | 53% | 58 | 47% |
Most responses raise concerns about the proposed fee scale and the wider local audit framework. The issues most frequently identified are the financial impact of the fee increase for bodies and the disproportionate amount of local audit work now needed, which consultees do not think reflects the real needs or risks of the sector.
The PSAA Board takes very seriously the points made in the consultation and has considered the feedback carefully. We are particularly concerned about the impact of a fee increase on bodies. However, PSAA cannot disregard the drivers of the additional fees, which are a mandatory increase in audit work under auditing standards and a contractual requirement relating to inflation.
Further information on the 2024/25 fee scale and the consultation is available on our website.
Key themes in consultation responses
The positive responses to the consultation generally recognise that additional audit work requires additional fees, however unwelcome these are. There is a broad range of views reflected in individual responses. The most common are:
- The impact of a fee increase is unwelcome, given the financial pressures on opted-in bodies.
- A more proportionate and local government-focused audit is needed to reduce the amount of audit work and cost.
- Audit costs must reduce to provide better value for money for local taxpayers.
- The whole local audit framework should be reviewed.
- The increase for inflation is higher than the current level and not reflected in bodies’ funding levels.
- PSAA must hold auditors to account for timely delivery.
- Auditors should focus on areas of the accounts relevant to local government bodies.
Consultees are concerned that a 9.5% increase for 2024/25 is a significant financial pressure, coming after the uplift required for 2023/24 under new audit contracts. However, responses also recognise that greater certainty in the fee scale on additional fees is helpful for budgeting, rather than having to wait until the end of the audit for fee variations.
Those who do not support the fee scale proposals consider that a further increase in audit fees is unacceptable. They state that bodies cannot sustain the increase, which will require further cuts to services and staff reductions, with no corresponding increase in funding. This is particularly emphasised by smaller councils and other bodies, as well as police and fire bodies, who are concerned that fees are no longer consistent with bodies’ size and complexity. Consultees are also concerned about lack of value for money for local taxpayers.
Many positive and negative responses highlight concerns about the increasing volume and cost of additional audit work, and the need for a more proportionate audit focusing on the areas of the accounts that are relevant to local government bodies.
This is a matter for the local audit system to resolve in consultation with bodies and suppliers, so that there is a common understanding on the purpose of audit and a scope to match it that adds value. We welcome CIPFA’s commitment to work on more accessible financial statements and support the Government’s commitment to overhaul the local audit system to give better value for money for bodies and taxpayers.
Some consultation responses state that additional requirements should be allowed for in the audit contracts. This has also been raised in previous consultations. The local audit framework requires us to set audit fees based on the requirements of the Code of Audit Practice. In the interests of safeguarding public funds, the contracts do not provide for potentially costly contingencies for changes in requirements that may or may not occur and for which the specific impact could not be quantified at the time of contract award. So as audit requirements change, these must be reflected in changes to audit fees.
There is an expectation in some responses that higher fees must come with a more timely and efficient audit experience. While we wholeheartedly agree with the aim, our strong view is that higher fees cannot deliver this alone. Up until the recent confirmation of backstop dates the legal framework did not include a statutory audit completion date, and the backlog should now diminish almost entirely. Ensuring that it does not evolve into perpetual large scale modified opinions is critical. There needs to be a combination of a more proportionate audit focused on the needs of the sector, underpinned by more proportionate financial statements. There also needs to be sufficient preparers and auditors with the appropriate skills.