MHCLG sets the grant rules, allocations and payment timetable. Bodies should direct grant questions to MHCLG. We can answer questions about the fee variation, calculation and determination process.
The backlog solution required firms to respond to an unprecedented volume of disclaimed opinions and prepare for the later build-back of assurance. Firms did not know, and could not reasonably have foreseen, the nature, scale or complexity of this work when they bid for the current contracts in 2022.
The percentage method keeps the charge proportionate to the scale fee and received more support than opposition in the consultation.
The costs arose from a system-wide solution that firms could not price into their 2022 bids. We reviewed the submissions and found the included costs reasonable.
MHCLG also confirmed that auditors should receive payment for necessary project costs that do not relate directly to individual audits.
MHCLG has confirmed that it does not have a lawful route to pay audit firms through us. Having decided to fund eligible project costs, MHCLG will provide the funding to bodies through its build-back grant arrangements. We will determine the fee variation, after which firms will invoice the relevant bodies.
The fee variation covers central project work, not audit work completed at each body. Firms cannot assign central methods, guidance and training reliably to individual audits. Audit progress therefore does not provide a sound basis for allocation.
The scale fee already reflects the relative size and complexity of each audit. One percentage gives a consistent method while producing different cash amounts for different bodies. Other factors would not allocate central costs more reliably.
The returns contain commercially sensitive staffing, rate and operational information. We have instead published the total charge, the work covered, the allocation method and each body’s calculation. We consider that this gives bodies the information needed to understand the fee variation while protecting sensitive detail.
A 7% charge recovers the £4.5m total from the bodies in scope. The scale fee broadly provides a consistent measure of each body’s audit size and complexity.
We recognise that many bodies met their reporting duties and entered the backlog because of wider capacity and system issues. The fee variation does not assign fault to a body. The Appointing Person Regulations provide the route for recovering eligible audit costs, while MHCLG’s build-back grant provides the funding route for affected bodies.