Where the audit requires substantially less work than the scale fee assumes, the auditor or body may identify the need for a negative fee variation. PSAA will assess the evidence before determining any reduction.
In 2020 PSAA commissioned independent research from Touchstone Renard to review the sustainability of the local government audit market.
During the summer of 2021 we considered the feedback provided by the market and confirmed our approach to support the drive towards a more sustainable market for local public audit services. We summarised the outcome of the market engagement in a report that we published in autumn 2021.
Our procurement strategy 2022 supported the drive towards a long term competitive and more sustainable market for local public audit services and recognised the need to encourage new entrants alongside existing suppliers. For example, we created different sized contract lots to reflect the range of capacity available within different firms.
We recognise the importance of councillors and Audit Committees having clear information about the scope and cost of the external audit.
PSAA consults bodies and other stakeholders on the proposed fee scale each year. Each body is notified of its proposed scale fee and any body-specific adjustment, and can provide relevant evidence or raise concerns before the final fee scale is approved.
At local level, the external auditor should explain the planned scope of the audit, the audit risks identified and the proposed fee to those charged with governance, normally through the audit planning report. Any significant changes to the work or proposed additional fees should also be explained clearly and discussed with the body.
For fee variations, PSAA considers the evidence submitted by the auditor and consults the body before determining the fee. This provides the body with an opportunity to comment on the reasons for the additional work and the amount proposed.
Audit Committees can support this process by seeking early and clear information from the auditor about the expected fee, asking for explanations of material changes and ensuring that proposed additional fees are reported transparently through the appropriate governance arrangements.
The audit contracts are between PSAA and the appointed audit firms and are managed independently by PSAA on behalf of bodies that opt in to our scheme. Individual councillors and Audit Committees are not directly involved in managing them.
However, councillors and Audit Committees have an important role in reviewing the delivery and cost of their body’s audit. They should expect the external auditor to explain the planned audit approach, key audit risks and proposed fee. Any significant changes to the planned work or proposed fees should also be explained clearly and discussed with the body.
PSAA consults bodies and other stakeholders on the proposed fee scale each year. Each body is notified of its proposed scale fee, and any body-specific adjustment, and can provide relevant evidence or raise concerns before the final fee scale is published at the end of November.
Where an auditor submits a fee variation, PSAA consults the body before determining the fee. This allows the body to comment on the reasons for the additional work, the evidence provided and the amount proposed.
We recognise the importance of transparency and will continue to consider how the information available to bodies, councillors and Audit Committees can support effective local scrutiny of audit fees and performance.
Public Sector Audit Appointments Limited (PSAA) has been specified as an appointing person under the Local Audit and Accountability Act 2014 and the Local Audit (Appointing Person) Regulations 2015. It has had the power to make auditor appointments for audits of the accounts from 2018/19 onwards on behalf of eligible principal local government bodies that opt in.
Eligible bodies are those in the principal local government body types listed in schedule 2 of the Local Audit and Accountability Act 2014 with annual income or expenditure in excess of £6.5m. This includes county councils, district councils, London borough councils, unitary authorities, metropolitan councils, local police bodies, fire and rescue authorities, combined authorities (covering elected regional mayors), national park authorities, conservation boards, passenger transport executives, waste authorities, functional bodies, and other specified bodies.
Authorities with income and expenditure of less than £6.5m (such as parish councils) are smaller authorities and do not require a full audit. Smaller authorities can choose to be treated as full audit authorities in which case they are eligible to opt in as principal authorities.
NHS bodies are not eligible to opt into our scheme.
The list of the local government bodies opted into the 2018 appointing person scheme is available.
The list of the local government bodies opted into the 2023 appointing person scheme is available.
We are very supportive of the overhaul of the local audit system. The government set out its approach to local audit in its Strategy for Local Audit Reform in December 2024 and provided further details in the outcome to its consultation published in April 2025.
The passing of the English Devolution and Community Empowerment Bill on 29 April 2026 includes the establishment of the Local Audit Office (LAO) to oversee and coordinate the local audit system in England, as part of MHCLG’s strategy to reform the local audit system.
Our e-bulletins provide details of recent developments.
Rebuilding assurance is additional audit work that may be required following a disclaimed or other modified opinion issued primarily because of the statutory backstop arrangements. The work helps auditors regain assurance over relevant balances and transactions so that they can return to unmodified opinions over time. The scope will depend on each body’s audit history, records, risks and available evidence.
The mechanism for allocating the costs of individual firm bids is the scale fee, which allocates the total costs of all firms’ tenders and PSAA total costs (approximately 3%) in a proportionate way across all bodies.
The scale fee does not vary in relation to which firm is appointed as auditor. Contingencies are not built into the fees and where additional audit work is required after the scale fee has been set, this results in a fee variation in line with the statutory framework. These may result in a permanent adjustment to the scale fee (for example group accounts are now required for a particular body) or may apply for a single year only (for example a change of a key financial system). The scale fee is linked to the relative risk and cost of a particular body’s audit.
PSAA has a duty to make appointments to all bodies that opt into the schemes. We have published our approach to auditor appointments for the two five-year appointing periods from 2023/24 to 2027/28 and from 2018/19 to 2022/23.
When we make auditor appointments we consider any formal joint working or shared service arrangements where these are relevant to the auditor’s responsibilities. Providing there are no independence considerations or other constraints, we will look to appoint the same firm as for another opted-in body where this is requested. Auditors must be independent of the bodies they audit, as required by the Ethical Standards issued by the Financial Reporting Council and in accordance with PSAA’s obligations under the Regulations.
If you have a specific enquiry about either of the appointing period schemes, please contact us at generalenquiries@psaa.co.uk.
PSAA has a clear process for managing complaints, which sets out those areas that it covers. It does not cover matters of professional judgement. We have a Memorandum of Understanding with professional regulators (The Institute of Chartered Accountants England and Wales (ICAEW) as the Recognised Supervisory Body (RSB) and the Financial Reporting Council (FRC)), such that complaints are dealt with by the most appropriate body.
PSAA undertakes contract monitoring of the firms it appoints. Each year PSAA carries out an annual survey that is designed to obtain views from opted-in bodies on the delivery of their audit. This forms part of its engagement with the sector as the feedback received informs discussions with the firms, DLUHC, the FRC, the NAO, the LGA, CIPFA, ICAEW and other key stakeholders involved in local audit in England.