Frequently Asked Questions

PSAA provides effective management of the contracts with appointed audit firms. Details of our contract management arrangements are on our website and in these FAQs under the topic ‘Contract Management’.

We meet regularly with the public sector leads at each contracted firm and ensure that matters concerning opted-in bodies are brought to their attention. We also work closely with MHCLG and other key stakeholders to identify ways to address concerns. 

We strongly believe that reducing the volume of local audit work is essential to delivering a more proportionate audit that complies with the Code of Audit Practice (the Code). This should be a key objective in reforming both the accounting and auditing frameworks.

Ultimately, the amount of audit work will influence the overall audit fee, alongside the fee rates determined through procurement processes. When setting scale fees, we also make adjustments for bodies where there are confirmed known changes in the level of audit work required, supported by comparative analysis across groups of bodies.

Once established, the Local Audit Organisation (LAO) will have greater flexibility to set and vary audit fees than is currently available to PSAA. Crucially it will be able to influence the nature and extent of audit work that is required. It will also consolidate functions that naturally complement the fee-setting process, such as responsibility for the Code of Audit Practice and regulating auditor performance.

In April 2025, MHCLG announced 16 new commitments to reform local audit, including simplifying financial reporting requirements and increasing audit capacity to reduce reliance on a small number of auditors. These reforms are supported by £49 million in funding to help eligible bodies clear audit backlogs and cover the additional costs of rebuilding audit assurance.

MHCLG wrote to all Chief Financial Officers of eligible local audit bodies on 24 June 2025 regarding the funding and published further details in a technical note on its website on 10 July 2025. The funding is provided as a non-ring-fenced grant and will be released in two stages during 2025/26. Allocations are based on audit fee size and the number of modified audit opinions. Funding is conditional on the publication of outstanding audited accounts and payment of audit fees determined by PSAA.

The first payments were made on 26 and 27 June 2025. MHCLG’s technical note explains how allocations were calculated and lists payments to each eligible body in section 3. The second instalment will be paid early in 2026 following a review of costs.

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.

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 reforms set out a clear purpose for local audit and its users, including proposals for simplified and proportionate financial reporting, improvements to the market’s capacity and capability, and ways to build strong relationships between local bodies and auditors. The overhaul includes establishing a new arms-length body, the Local Audit Office (LAO), which will combine functions from across the system and oversee local audit.

Our e-bulletins provide details of recent developments.

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.

Issues with the timeliness of audit opinion delivery are caused by a variety of factors. In common with all stakeholders in the local audit system, we want to see the earliest possible return to a position in which virtually all local bodies can publish their audited accounts by the target date specified in the Accounts and Audit Regulations.

There are several significant obstacles which need to be overcome before that goal can be realised. They include:

• a backlog of delayed prior year audit opinions which are still outstanding;
• a shortage of audit staff with the requisite skills and experience;
• more demanding regulatory requirements which increase the time and resources needed to complete each audit; and
• local bodies entering more frequently into innovative transactions which require detailed examination by auditors, and capacity shortages in finance and other staff to deal with the volume and complexity of local government accounts.

In January 2023, the NAO published a progress update on the timeliness of local auditor reporting in England. This was an update on their original report issued in March 2021.

The 2020 NAO Code of Audit Practice requires auditors to report on a timely basis, clearly, concisely, and objectively without fear or favour. Timely reporting includes producing audit reports in time, insofar as the auditor can do so under auditing standards, to allow local bodies to comply with the requirements placed on them to publish their audited financial statements.

We have amended our expectation of firms within the 2021 Terms of Appointment. This states that where in the auditor’s view it would not be possible to issue an audit report in compliance with the auditing standards and the guidance issued by the NAO by the publishing date, the audited body must be consulted on an alternative target date. The auditor must notify the audited body promptly of any delays to the agreed timetable, and reissue the timetable having regard to those delays after further consultation.

The local audit system working together as a whole is the most effective way to drive the timely delivery of audits. It is important to recognise that any improvements will take time to materialise given the nature of retrospective audits and the significant number of delayed audits. There are no easy solutions which we or any other parties can simply action. The reality is that returning to a more predictable and stable position is going to take some time and will be a gradual process. Our e-bulletins provide updates on developments across the local audit system to seek to address the well-documented challenges.