November 2025
Summary
This publication sets out the 2025/26 scale of audit fees payable by local bodies that have opted into PSAA’s appointing person scheme. The fee scale has been confirmed following our consultation conducted in September–October 2025, in line with statutory requirements to set the fee scale before 1 December.
Audit work under this scale will apply to audits for the financial year ended 31 March 2026 to be completed by the statutory backstop date of 31 January 2027, as confirmed under the dates proposed in a statement on the local audit backlog published by the Ministry of Housing, Communities and Local Government (MHCLG) in July 2024 and confirmed in the Accounts and Audit (Amendment) Regulations 2024.
We consulted on an initial proposal of an average increase of approximately 4%, comprising a 2.8% contractual inflationary adjustment and a provisional 1.2% uplift for additional audit work, based on submissions from audit firms. Following consideration and consultation responses, the final uplift for additional audit work built into scale fees has been determined as 0.28%. This is in addition to the 2.8% inflation, giving an overall average fee increase of 3.08%. If any additional audit work is required beyond what is covered by the scale fee, we will review the associated costs in line with our established fee variation process.
Consultation responses raise understandable concerns about fee increases given the financial pressures on opted-in bodies. We received 126 responses (25% of consultees), of which 122 (97%) were from opted-in bodies and four (3%) from other stakeholders. Of those who expressed a view, 80% agree with the proposed fee scale and 20% do not.
We recognise the significant financial and wider pressures on opted-in bodies and understand that fee increases are an unwelcome additional budgetary pressure. We only propose uplifts where necessary to reflect recurring work or contractual obligations.
The backlog solution involves modified opinions on a scale that is unprecedented globally. However, this fee scale excludes costs for backlog-related assurance work.
On 10 July MHCLG published a technical note for local bodies with disclaimed opinions due to the backstop dates as set out in the Audit and Accounting Regulations 2024 and confirming arrangements for the distribution of £49 million in funding to support clearing the backlog and rebuilding assurance. The National Audit Office (NAO) issued its Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06, addressing special considerations for rebuilding assurance for specified balances following backstop-related disclaimed audit opinions. The LARRIGs are intended to support the reset and recovery of local audit in England. The FRC has issued a guide on the Local Audit Backlog Rebuilding Assurance which explains how rebuilding assurance after a disclaimed opinion may work in practice on local government audits.
We are working closely with MHCLG and other system partners to inform and support the implementation of these measures, including funding arrangements that reflect the scale and complexity of the required audit work.
We welcome the Government’s intention to reform the local audit system through the proposed English Devolution and Community Empowerment Bill. Subject to its approval, the Bill would establish the Local Audit Office (LAO), representing a significant shift in fee-setting and system oversight.
The Bill introduces principles aimed at enhancing consistency, transparency, and responsiveness in fee arrangements. These may begin to inform PSAA’s work ahead of the LAO’s formal launch. If implemented, the reforms are expected to address key issues raised in the consultation, including fee transparency, audit complexity, and capacity challenges. By simplifying financial reporting and aligning fees more closely with the scope and risk profile of audited bodies, the proposed framework seeks to support a more consistent and sustainable audit system.
We have actively supported these reforms and continue to advocate for changes that improve audit delivery and value for money. We are working closely with stakeholders to ensure that the concerns raised in this consultation inform the development of the new framework.
Our strong view is that a reduction in the volume of local audit work is required to deliver a more proportionate Code of Audit Practice (Code) compliant audit. This should be an imperative of reforming the accounting and auditing frameworks. We welcome MHCLG actions to address delayed opinions and strongly support the Government’s commitment to overhaul the local audit system to enable bodies and taxpayers to get better value for money.
The PSAA Board has carefully considered consultation feedback and concluded that the 2025/26 fee scale must be confirmed as proposed. While we acknowledge that fee increases are challenging for opted-in bodies, they are necessary under current requirements and contractual commitments. Achieving a more proportionate audit scope remains a system-wide priority, requiring a shared understanding of audit’s purpose.
Our information paper for 2024/25 audits identifies the impact of changes in standards and provides information on how opted-in bodies and auditors can work together to mitigate the amount of additional audit work needed.