Summary
This consultation invites comments on our proposals for setting the fee scale for 2026/27 audits of opted-in bodies.
We are required under local audit regulations to consult on and set the 2026/27 fee scale by the end of November 2026. Audit work under this fee scale is likely from February 2027 to the backstop date 30 November 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 proposed 2026/27 fee scale includes a 3.0% increase on the 2025/26 scale fees to meet the contractual inflationary increase payable to audit firms for 2026/27. We also propose body-specific adjustments where there is evidence that additional audit work is recurring, including work relating to IFRIC 14 pension asset surpluses. We have considered the impact of wider accounting and auditing developments but do not currently have sufficient evidence to support further scale-fee adjustments. Once sufficient evidence is available to demonstrate a recurring and quantifiable impact, the LAO may wish to consider how such costs should be reflected within its future fee regime.
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 growing backlog of outstanding audits, and capacity pressures across the system. The Government has responded by introducing statutory backstop dates and wider reform measures to reset and recover the local audit system. This includes creating the Local Audit Office (LAO) to strengthen oversight, raise audit standards, and promote greater transparency. We have been closely engaged in these developments and remain committed to working with partners to support their successful delivery.
We support reforms to accounting and auditing frameworks that reduce the volume of local audit work needed to deliver a more proportionate Code of Audit Practice (Code) compliant audit. We welcomed MHCLG’s actions 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, and only propose increases where additional recurring work is required, or in line with contractual requirements. We prepare our information paper for 2025/26 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 2025/26 audits and provide more context for the 2026/27 Scale Fee consultation. It also provides information on how audited 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. MHCLG’s ongoing funding arrangement reimburses local bodies for eligible costs invoiced by audit firms for rebuilding assurance work arising from the backlog solution. Its technical note, published on 10 July 2025 and updated on 6 January 2026, sets out the funding arrangements for clearing the backlog and rebuilding assurance at bodies that received disclaimed opinions because of the backstop dates in the Accounts and Audit Regulations 2024.
The National Audit Office, (NAO), issued its Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06. The LARRIGs are intended to support the reset and recovery of local audit in England. They also issued Supplementary Guidance Note (SGN) 05 on 15 December 2025. This provides additional guidance to support auditors when considering the impact of limited or no assurance on the classification between usable and unusable reserves in local authority financial statements. The Financial Reporting Council, (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. Earlier this year, we also consulted on audit firms’ project costs arising from the local audit backlog solution, and published FAQs in response to feedback from bodies.
More detail on the 2026/27 fee scale proposals is set out in the next section of this consultation. We are running a webinar for bodies on Monday 28 September from 2.30pm to 3.30pm. The webinar will explain the elements of the proposed 2026/27 fee scale and offer you the opportunity to ask questions which may inform your response to the consultation. We encourage you to send questions in advance to laqf@psaa.co.uk. The second part of the webinar will provide an update on the development of the LAO and address questions submitted before and during the session.
Our Board will consider consultation responses carefully before publishing the final 2026/27 fee scale on our website by 30 November 2026.