Frequently Asked Questions

In April 2025 MHCLG announced 16 new commitments to reform local audit, including simplifying financial reporting requirements and increasing capacity to avoid reliance on a small number of auditors. The reforms are backed by funding of £49 million to help eligible bodies clear their audit backlogs and cover the additional cost of rebuilding audit assurance.

MHCLG wrote to all Chief Financial Officers of eligible local audit bodies on 24 June 2025 about the funding and published further information on its website in a technical note on 10 July 2025. The funding takes the form of a non-ring-fenced grant and is being released in two stages during 2025/26. Allocations are based on the size of a body’s audit fees and the number of modified audit opinions. Funding is subject to the conditions that outstanding audited accounts have been published and audit fees determined by PSAA have been paid.

MHCLG made the first payments on 26 and 27 June 2025. MHCLG’s technical note sets out how individual allocations have been calculated and lists at section 3 the payments made to each eligible body. The second instalment will be paid early in 2026, following a review of costs.

A body which considers it is eligible for the funding but has not received a payment should in the first instance check its compliance with the eligibility criteria set out in the MHCLG technical note. Bodies which published audited accounts after the backstop dates have not been included in the June allocation determinations and will be paid in the coming months.

The MHCLG announcement provides the following contact details for any queries or issues with the payments: localaudit@communities.gov.uk.

If your organisation meets the requirements to be treated as a smaller authority, it will automatically fall under the SAAA regime unless it opts to be treated as a ‘full audit authority.’

PSAA contracts with supplier firms to deliver audits for organisations that require an audit under the Local Audit and Accountability Act 2014.

Your organisation is covered by PSAA’s contractual arrangements for any financial years where an audit under the Code of Audit Practice is required. If your organisation has previously chosen to be a ‘full audit authority’ then it can decide to prepare accounts and change to being treated as a smaller authority through SAAA’s regime at any time.

If your organisation is not an MLA in 2025/26 then a fee should not be charged as long as you do not also administer a pension fund that is an MLA. The MLA definition applies to the accounts of local authorities that administer pension funds, thus in this case a fee would be charged. Under the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014, MLA-relevant authorities include those maintaining a pension fund with either more than 20,000 members or gross assets exceeding £1,000 million.

Once appointed, auditors are independent and the decisions they take are down to their professional judgements. There may be differences in judgement between years by individuals from the same firm as views change or where more evidence becomes available.

Local audit regulations require PSAA to set the fee scale before 1 December of the financial year to which the audit fees relate. This deadline often precedes full visibility of the impact of any changes.

If a change in audit requirements is substantial and we can reliably estimate the additional fees, we will incorporate them into the fee scale as soon as possible. Please note that we do not include contingencies within scale fees.

PSAA has no power under the Local Audit and Accountability Act 2014 or the Regulations to make arrangements or appointments for assurance on grant certification claims and returns.

Certification requirements for Housing Subsidy are set by the Department for Work and Pensions (DWP) and delivered under a tri-partite agreement between DWP, the local authority, and the supplier firm. These requirements are outside the scope of the Code of Audit Practice.

However, the auditor of a local authority’s financial statements will need to obtain assurance over accounting entries related to benefit payments. We will continue to monitor developments and assess the impact of any changes on this work.

PSAA has a robust process to review all fee variations submitted. The process is carried out diligently in line with the expectations of the Local Audit (Appointing Person) Regulations 2015 (Regulation 17(2)). PSAA is conscious that when a determination is made it is legally binding on both an auditor and the audited body, and that it is public money being transacted. This can take some time, especially as the balance between scale fees and the volume of additional fees was never envisaged to be as it is now. It has brought in additional capacity to help process the increased volume.

Other factors include that firms can take time to submit variations and supporting information, and arranging a meeting with the body can sometimes take a while to achieve.

The process is not protracted if information provided by the auditor is sufficient to enable PSAA to comply with its statutory duties in assessing a fee variation. A change in February 2022 to the Local Audit (Appointing Person) Regulations enables the scale fee to be set in November, closer to the start of audit work the following year. This should lead to a reduction in the number of audits that require scale fee variations. If necessary, in the case of significantly protracted audits we can approve interim fee variations.

A newly established eligible body has the right to opt in by giving notice to PSAA.

An eligible body who was invited to join but declined only has the right to request to become an opted-in authority.

The notice must confirm the body’s decision to opt in, and must specify the body’s postal address. The body will become an opted-in authority for the remainder of the appointing period on the date the notice is received by PSAA.

New bodies which meet the definition of smaller authority (s6 of the Local Audit and Accountability Act 2014) where the higher of the authority’s annual gross income and expenditure does not exceed £6.5m up to 2024/25 and £15m thereafter, fall within the arrangements of the Smaller Authorities Audit Appointments Limited.