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.
MHCLG has stated that build-back grant payments will fund eligible project costs. The timing of a firm’s invoice and the grant payment may differ. MHCLG controls the grant process and will provide information on allocations and payment timing.
MHCLG stated:
“MHCLG has restated its position that it will incorporate the project change costs into its review of the grant allocation formula this autumn so that the project change costs charged to bodies are reflected in future build-back grant payments.”
Firms are expected to prepare a total build-back cost estimate for each individual audit and share it with the relevant body and MHCLG.
This will give bodies early sight of the expected costs and the assumptions supporting them.
The estimate will reflect the evidence, risks and work expected for that audit. We will use the estimate as a baseline when reviewing fee variation proposals, although the final cost may change if the scope, risks or circumstances of the audit change.
MHCLG has confirmed that build-back grant payments will fund eligible project costs charged through PSAA’s fee variation process. MHCLG included these costs in its review of the grant allocation formula.
MHCLG stated:
“MHCLG has restated its position that it will incorporate the project change costs into its review of the grant allocation formula this autumn so that the project change costs charged to bodies are reflected in future build-back grant payments.”