Visit our devolution and LGR hub for the latest information, support and resources
- About
- Political
-
Our support
- Workforce and HR support
- Children's services
- Communications and community engagement
- Cost of living hub
- Council assurance and peer challenge
- Councillor and officer development
- Culture and sport
- Cyber, digital and technology
- Devolution Hub
- Equalities hub
- Finance
- Governance and assurance
- LGA principal advisers and regional teams
- The LGA Consultancy
- LGA Solutions
- One Public Estate
- Partners in Care and Health
- Planning Advisory Service (PAS)
- Procurement hub
- Research and data
- Sustainability hub
- Transformation
- Case studies
- Parliament
-
Topics
- Children and young people
- Communities
- Community safety
- Culture, tourism, leisure and sport
- Devolution
- Economic growth
- Employment and skills
- Climate, environment and waste
- European and international
- Finance and business rates
- Fire and rescue
- Housing and planning
- Licences, regulations and trading standards
- Severe weather
- Social care, health and integration
- Transport
- Publications
- Events
Comments on the proposals
4. The consultation outlines the limitations of incomplete information that is available to set the scales fees and we appreciate the problems that this causes. We note that the timing of the consultation is governed by legislation designed on an assumption that local audit is in a steady state, which is at odds with the dynamic situation we are currently experiencing.
5. We were supportive of the proposals in the November 2020 consultation on fee variations to deal with as much as possible nationally. The outcome of that consultation has now been published and we are supportive of the planned programme of research announced in that outcome, to calculate the likely impact on audit work and fees of some expected changes in audit requirements. While we appreciate this is primarily for variations to the 2020/21 scale fees, this should also be helpful in the setting of scale fees for 2021/22, as outlined in the consultation.
6. That said, in considering the level of fees, it is also worth drawing attention to the point that auditors tendered for the work over a fixed period and the risk of variation lies at least partly with the auditor. Unless there are significant variations to the work that local authorities now require (as opposed to changes imposed by third parties), contractors ought to accept in equal measure the risks inherent in the arrangement. We would question whether a similar approach to variations would be applied to a tender for a commercial audit (though we acknowledge that such an audit would not be subject to the same restrictions in terms of timing of setting fees that apply to local authorities).
7. The consultation outlines three stages, starting with the 2020/21 scale fee as a base and adding the result of each stage to set the scale fee for 2021/22. Overall, the approach is supported as being a good attempt to set the most sensible and meaningful level of fee possible for each individual audit body before the year starts, bearing in mind the limitations of incomplete information. We will comment on each.
7.1. First, make relevant adjustments for ongoing additional audit work arising from 2018/19 approved fee variations.
Response: This is supported. It is likely that the first year of a new requirement will require more work than ongoing years, so it will be important to separate out the ongoing requirement. As auditors become more accustomed to new requirements, they should be building up a body of knowledge and expertise.
7.2. Second, any adjustments relating to changes in auditing and financial reporting requirements which are classified as national variations under PSAA’s new arrangements for dealing with fee variations and which are determined before 31 March 2021.
Response: This is supported. The planned programme of research referred to above should be helpful in this. In doing this, how the factors affect each council individually should be understood, and care should be taken to allow that one size does not fit all. For example, if a council does not hold any leases that are affected by the changes to IFRS 16, then that is one change that should not feed through into a change in scale fees for that council.
7.3. Third, any relevant adjustment for inflation arising from PSAA’s contracts with audit suppliers.
Response. This is supported and we note the caveat that “it appears unlikely that the relevant provision will result in additional fees payable by audited bodies in respect of 2021/22”.
8. Taking and applying these stages all together, it is hard to see what more could be done to set a meaningful scale fee for 2021/22 before the start of the financial year. However, we note that a great deal of information will still be unknown and that therefore this still leaves councils (and auditors) with a lot of uncertainty. While this may be unavoidable, good communication with councils is essential so that they fully understand each step as it is taken and can plan for the financial and other consequences.