Summary
This consultation invites comments on our proposals for setting the fee scale for 2025/26 audits of opted-in bodies.
We are required under local audit regulations to consult on and set the 2025/26 fee scale by the end of November 2025. Audit work under this fee scale is likely from March 2026 to the backstop date 31 January 2027 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.
In summary, our 2025/26 fee scale proposals include an average increase of approximately 4% on the 2024/25 scale fees to cover a contractual inflationary (2.8%) increase payable to audit firms for 2025/26 and confirmed changes in ongoing audit work based on information received since we set the 2024/25 scale fees.
For some bodies we are proposing to update the scale fee where there are confirmed changes in ongoing audit work since we set current scale fees. Incorporating fee increases into scale fees provides more certainty and without this consolidation such changes would be payable as fee variations.
Since 2019 the local audit framework has faced significant challenges, including a mounting backlog of outstanding audits, and ongoing capacity pressures across the system. In response, the Government has set statutory backstop dates and launched a wide-ranging reform programme. This includes creating the Local Audit Office (LAO) to streamline and simplify the system, providing stronger accountability and audit that is proportionate and relevant. We have been closely engaged in these developments and remain committed to working with partners to support their successful delivery.
Our strong view is that work on reforming accounting and auditing frameworks must reduce the volume of local audit work needed to deliver a more proportionate Code of Audit Practice (Code) compliant audit. We welcomed the actions MHCLG has taken to address delayed local audit opinions and expressed our strong support for the Government’s commitment to overhaul the local audit system to enable bodies and taxpayers to get better value for money.
We recognise the significant financial and wider pressures on bodies and understand that additional audit fees are an unwelcome additional budgetary pressure. We only propose increases where additional recurring work is required, or in line with contractual requirements. We prepare our information paper for 2024/25 audits to provide information to audited bodies on changes to auditing and accounting standards and outline the impact that they might have on audit fees. This is intended to support discussions between bodies and auditors on fee variations for 2024/25 audits and provide more context for the 2025/26 Scale Fee consultation. It also provides information on how bodies can work to mitigate against additional audit fees.
We will process fee variations for audit work to rebuild assurance as this is not recurring 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. The NAO issued its Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06. This relates to 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 regarding funding for the rebuilding of assurance audit work. MHCLG published a technical note on 10 July 2025 confirming arrangements for distribution of the £49 million funding they are providing to support clearing the backlog and rebuilding assurance.
From our engagement with the audit firms we have sought to understand the impact of the increased MLA threshold to £875m (from £500m) effective from 17 August 2025. It is currently unclear whether we will be able to update the 2025/26 scale fees for this change before their final publication in November. If this is not possible we will process negative FVs for affected bodies. We will apply the same approach to the application of the smaller authorities threshold increasing from £6.5m to £15m.
More detail on the 2025/26 fee scale proposals is set out in the next section of this consultation. We will be running a webinar for bodies on Thursday 2 October from 2pm to 3pm which will include information around the fee consultation along with the CIPFA consultation on the radical new code proposed (covered in Next Steps section).
Our Board will consider consultation responses carefully before publishing the final 2025/26 fee scale on our website by 28 November 2025.