November 2022
Summary
This document sets the 2022/23 scale of audit fees payable by local bodies that have opted into PSAA’s appointing person scheme for the period 2018/19 – 2022/23. Most audit work under this fee scale will be undertaken from April 2023 onwards.
Our consultation on the fee scale explained the impact on audit fees of the significant tensions and pressures in the wider audit market and profession, and of evolving arrangements in the local audit system. It also set out the practical difficulties for PSAA in setting a realistic fee scale without full information on all audit requirements or any information on audits for the preceding year.
The Department for Levelling Up Housing and Communities (DLUHC) has announced a range of measures to address the significant challenges in the local audit framework. These measures include arrangements for a ‘system leader’, a role which is to be located within a new regulator, the Audit Reporting and Governance Authority (ARGA) when it is established. In preparation, the Financial Reporting Council (FRC) is implementing shadow arrangements and has appointed the first Director of Local Audit.
On the basis of the broadly positive response to our consultation on the proposed 2022/23 fee scale, PSAA is setting the fee scale as set out in it. The fee scale therefore uses the fee scale set for 2021/22 audits as a baseline, with adjustments for:
- recurrent fee variations for 2019/20 and 2020/21 audits, for audited bodies where these have been submitted to PSAA and approved; and
- the 5.2% inflationary increase required under PSAA’s current audit contracts, although this will be funded from the surplus which would otherwise be distributed to opted-in bodies.
As set out in the consultation, we are not adjusting the 2022/23 fee scale for the additional work required for the VFM arrangements commentary or work on some updated technical standards because we do not yet have sufficiently reliable information on the ongoing impact of these changes. The local fee variations process will continue to apply until we are able to consolidate the additional requirements into a future fee scale or we are able to determine national fee variation levels.
We are grateful for all the responses to our fee scale consultation, which have provided very helpful feedback on our proposals and the concerns of stakeholders. The PSAA Board has reflected on the consultation outcome and takes very seriously all the points made.
Many of the issues raised in responses to the consultation are complex and typically extend beyond PSAA’s remit. PSAA has highlighted the need for urgent action to reform the local audit system in England, in response to the pressures and market fragility of recent years. We have publicly stated our view that radical changes are needed in the local audit system to achieve a more proportionate audit and a more sustainable audit system. We will continue in our determination to seek action on these issues with government and key stakeholders.
The 2022/23 fee scale is the last in the current appointing period which is under the 2017 audit contracts. New contracts will apply from the 2023/24 audit following a procurement during 2022, which was very challenging due to the current complexities and fragility of the local audit market. In announcing the procurement outcome, we advised of the likelihood of a major re-set of total fees for 2023/24, involving an increase of the order of 150% on the total fees for 2022/23. The actual total fees will depend on the amount of work required, which is still to be established. We will consult on the fee scale for the 2023/24 audit in early autumn 2023.