PSAA response
We considered every response and have retained the proposed approach. The consultation showed broad support, while identifying areas where bodies need greater assurance: funding, cost scrutiny, allocation and safeguards against double recovery.
We have retained the 7% calculation because it provides a consistent and proportionate way to allocate the £4.5m total. The scale fee broadly reflects the relative size and complexity of each audit. The charge only applies to bodies that will receive funding from MHCLG.
Before consultation, we reviewed each firm’s submission using a common approach that included our published 2024/25 fee variation rates chargeable to bodies. We assessed the work claimed, staff time and grades, the number of affected audits, the number of disclaimed audit years, average costs per body and significant differences between firms. This work gave us sufficient assurance that the costs included in the £4.5m total were reasonable and fair.
The costs relate to central project work, including the development of audit approaches, training, guidance, portfolio assessment and resource management. Firms cannot reliably attribute these costs to individual audits. The amount of audit work completed before a body received a disclaimed opinion therefore does not provide a sound basis for allocating the central costs for the disclaimer process.
We will apply controls to identify and prevent double recovery. Firms are expected to use the standard templates we developed to provide a total build-back cost estimate for each individual audit. Once the auditor has completed its assessment, the firm is expected to share the estimate with the relevant body, and we will share it with MHCLG. Sharing the estimate will give each body early sight of the expected cost and allow it to discuss the scope and assumptions with its auditor. A firm must explain and evidence any significant difference between its estimate and later fee variation proposal before we determine the fee.
We will assess build-back fee variations already received and future proposals against the estimates, costs covered by this fee variation and average costs across firms. We will investigate significant differences, require supporting evidence and exclude any costs already recovered through this fee variation.
Audit-level estimates, cross-firm comparisons, evidence checks and our established review and determination process provide a sound basis for identifying and excluding duplicate costs.
MHCLG has restated that build-back grant payments will fund eligible project costs charged through this process. MHCLG controls grant allocations and payment timing. We will continue to work with MHCLG and update bodies when further information becomes available.
We have published frequently asked questions alongside this outcome which are also available on our website. The FAQs explain the work covered, our review of firms’ submissions, audit complexity and rate comparisons, MHCLG’s funding arrangements, the distinction between central and body-specific work, and the controls used to reduce the risk of double recovery.