Consultation Outcome
The consultation asked two main questions and Table 1 summarises the responses. Question 3 asked whether respondents agreed with recovering firms’ project costs through a one-off fee variation charged to bodies that received a backstop related disclaimed or qualified opinion. MHCLG has confirmed that these charges will be included in its review of the grant allocation formula so that they are reflected in future build-back grant payments. Question 4 asked whether we should calculate the fee variation as 7% of the 2024/25 scale fee rather than use a flat fee.
Table 1: Consultation response summary
Support was high for both the overall proposal (80% support or support with reservations) and the calculation method (76%). Comments on the calculation focused on whether the allocation should reflect work completed before disclaimer, the body’s complexity or the number of disclaimed opinions.
Key themes from responses
The responses raised seven main themes:
Recovery mechanism – Many respondents did not challenge the view that firms incurred additional costs in responding to the backlog solution and that a mechanism is needed to recover those costs. Several also recognised that firms could not reasonably have foreseen the work when they bid for the contracts.
2. Responsibility for backlog costs – Many bodies said they prepared their accounts on time but entered the backlog because auditors lacked capacity. Some argued that government and audit firms should bear more of the cost. Note that MHCLG has stated that it will cover the cost.
3. Funding certainty – Funding certainty was a common theme. Many respondents sought assurance that MHCLG’s grant would fully reimburse the charge, leaving bodies with no net cost. They also requested clear information on the timing and operation of the grant arrangements.
4. Transparency of the £4.5m total – Respondents asked how firms calculated the costs, how PSAA challenged the submissions and why PSAA judged the costs reasonable. They expect the charge to provide value for money.
5. Percentage method and 7% level – Most respondents preferred a percentage of scale fee to a flat fee because it reflects the relative scale and complexity of bodies. Some questioned the 7% level or suggested other allocation factors.
6. Double recovery – Respondents asked PSAA to keep central project costs separate from body-specific audit and build-back work. They also asked PSAA to stop firms claiming the same costs again through future fee variations.
7. Future build-back costs – One respondent asked for clearer forecasts of future body-specific build-back costs. These costs fall outside this fee variation but affect bodies’ financial plans.