Scale fees during the appointing period 2018/19 to 2022/23
We published the fee scale for opted-in bodies for 2018/19, the first year of the current five-year appointing period, in March 2018. We were able to reduce scale fees for 2018/19 by 23 per cent, compared to the fees applicable for the previous year, as a result of the favourable prices secured from firms in our audit services procurement and planned reductions in PSAA’s own operating costs.
When we published the 2018/19 fee scale, we explained that PSAA hopes to be able to maintain the 23 per cent reduction for the first three years of the appointing period, based on assumptions at that time about inflation and the amount of work auditors are required to undertake.
In advance of consulting on the fee scale for 2019/20, the second year of the appointing period, we have reviewed our assumptions and estimates. Our review has confirmed that we are able to sustain the 23 per cent reduction for the 2019/20 audits.
We currently expect to maintain the 23 per cent reduction for the third year of the appointing period (for audits of the 2020/21 accounts), and may be able to maintain the same level for all five years of the appointing period, but it is not possible to be certain at this early stage. At present we are making cautious assumptions about the likely level of inflation during the appointing period, having regard to the clear uncertainties and potential risks in the longer-term economic outlook.
Scale fees must cover both the cost of auditors’ work at individual opted-in bodies and PSAA’s own costs. PSAA has undertaken a significant review of its own costs and staffing structure, and has implemented changes to reduce its cost base for the appointing period.
The most significant factors that could have an impact on the level of scale fees required during the appointing period relate to:
- Inflation: there is uncertainty about the expected level of inflation but a generally rising trend. The contracts with audit firms include an increase for inflation in the later years of the appointing period.
- Code of Audit Practice: the National Audit Office is required to publish a new Code every five years. The next Code will be applicable from 2020/21, the third year of the appointing period. Any changes to the scope of auditors’ work, whether this increases or decreases the work required, must be reflected in scale fees.
- Changes in financial reporting requirements: current scale fees reflect the audit work needed based on current financial reporting requirements. Changes to these requirements may have an impact on scale fees.
It is not PSAA’s intention to generate or retain any surplus from scale fees. If any surplus arises, it will be distributed back to opted-in bodies. The most recent distribution of this type was made in December 2017. The scale of any future distribution is likely to be modest at individual authority level.