LGA response : Public Sector Audit Appointments Consultation on the 2023/24 audit fee scale

The Local Government Association (LGA) is the national voice of local government. We are a politically led, cross party membership organisation, representing councils from England and Wales.

Our role is to support, promote and improve local government, and raise national awareness of the work of councils. Our ultimate ambition is to support councils to deliver local solutions to national problems.

This response has been cleared by the lead members of the LGA’s Economy and Resources Board.

We appreciate the difficult context for the setting of the audit fees for 2023/24. Local audit is in an ongoing crisis. The causes of the crisis are not simple. It has been recognised that they are multi-faceted and complex and will take time to address. The solution requires a concerted response from a range of stakeholders including Central Government, the audit firms, the regulators and CIPFA. We have been pressing DLUHC for a long time to set a firm timetable by which timely audits will be restored.

We appreciate the efforts that have been made to improve the fee setting process. We supported the change in the date for setting annual fees and the changes in the fee variation process introduced by PSAA, but it is also clear that the backlog in completed audits has had a big impact on the proposals that PSAA have put forward for the 2023/24 fees.

The change in the date for setting the scale fees was supposed to enable the use of much more up to date data and so improve the scale fee and reduce the need for fee variations. However, the lack of completed audits to provide this better information has frustrated this process and the proposals made by PSAA are, in our view, the best way of calculating the figures that can be made in the circumstances.

We also appreciate that this is the first year that fees will be set under the new procurement that was undertaken in 2022. We understand that the overall uplift in fees of 151 per cent is a result of a price increase following a full procurement exercise. We understand that this follows several years where audit fees have been at a lower level than historically, but nevertheless this increase now is still unwelcome. It will be an additional pressure on council budgets which are already stretched. We are calling on the Government to provide full funding to cover the costs of the increase which we understand are estimated to be in excess of £50 million per year across all councils.

But we appreciate and do not underestimate the achievement that as a result of the 2022 procurement exercise auditors were appointed to all opted in bodies.

Question 1. Do you support the proposals in the consultation for the fee scale for 2023/24 audits? Yes / Yes with some reservations / No

Please provide additional comments to expand in your response.

Yes

While the cost of the 151 per cent increase in the scale fee is unwelcome in itself, we accept that the proposals make the best use of available information to set as accurate a scale fee as possible in the circumstances. The clarity of the process in outlining the steps taken and identifying the impact of each specific factor (where these are known) is a strength. It enables both clarity on fees for each opted in body and also identifies factors which have and, maybe more importantly, have not, been taken into account. This will be essential when coming to set fee variations in response to work that has been done or has not. This could be a very important factor in setting variations when proposals to address the audit backlog are finalised.

Question 2. Do you agree with the proposed elements of the 2023/24 fee scale?

A  - The scale fees for 2022/23

Plus:

B - Fee variations for recurrent additional audit work in prior years not yet included in scale fees

C - Changes in local audit requirements

D - Adjustments at specific bodies for local circumstances

E - Adjustment for the procurement outcome

Yes / Yes with some caveats /No

Please indicate which proposed elements you agree / disagree with and add any additional comments you wish to make.

Yes

See answer to question 1. This approach makes sense and is very helpful.

Question 3. Are there other factors you think should be reflected in the 2023/24 fee scale? YES/NO

Please provide additional comments to expand your response

No

Question 4. Any other comments you would like to make?

Please see comments made in the introduction.

Bevis Ingram

Senior Adviser Finance

Phone: 079 2070 2354

Email: [email protected]