Frequently Asked Questions

There are numerous very significant hurdles to creating a public sector auditor and addressing them is not in PSAA’s gift.

There are only nine firms in England registered to undertake local audit and three of these firms did not bid. Unlike other parts of the UK, in England there is no auditor of last resort (or in-house provision), so we are wholly reliant on the market. We are calling for urgent change to move the local audit system to a more sustainable footing which may allow greater confidence and optimism as we approach the next procurement in five years’ time.

We have made public statements that the local audit market is failing, and we are actively calling for reform in response to the challenges that local audit is facing including:

• Bringing local audit back on track – Room 151
• Moving towards sound financial management – The MJ

The main circumstances in which PSAA will consider changing an auditor appointment during the five-year appointing period are:

• for independence reasons, such as the identification of a conflict of interest involving the existing audit firm;
• the emergence of new joint working arrangements where the appointment of the same auditor to all partners would be beneficial; or
• where there had been an irretrievable relationship breakdown would also be considered.

An eligible body appointing its own auditor may find it more difficult to change their auditor during the contracted period, not least because it would require undertaking a new selection and procurement exercise. It is important to note that regardless of who makes the appointment only firms registered to provide local audit can be appointed.

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

MHCLG wrote to all Chief Financial Officers of eligible local audit bodies on 24 June 2025 about the funding and published further information on its website in a technical note on 10 July 2025. The funding takes the form of a non-ring-fenced grant and is being released in two stages during 2025/26. Allocations are based on the size of a body’s audit fees and the number of modified audit opinions. Funding is subject to the conditions that outstanding audited accounts have been published and audit fees determined by PSAA have been paid.

MHCLG made the first payments on 26 and 27 June 2025. MHCLG’s technical note sets out how individual allocations have been calculated and lists at section 3 the payments made to each eligible body. The second instalment will be paid early in 2026, following a review of costs.

A body which considers it is eligible for the funding but has not received a payment should in the first instance check its compliance with the eligibility criteria set out in the MHCLG technical note. Bodies which published audited accounts after the backstop dates have not been included in the June allocation determinations and will be paid in the coming months.

The MHCLG announcement provides the following contact details for any queries or issues with the payments: localaudit@communities.gov.uk.

Yes. MHCLG has announced funding to help eligible bodies cover reasonable additional audit costs related to rebuilding assurance following backstop-related disclaimed or modified opinions. Eligibility and payment arrangements are set by MHCLG and are separate from PSAA’s fee-setting and fee-variation processes because the funding does not cover fee variations that are not related to rebuilding assurance. Bodies should refer to MHCLG’s current technical note to establish whether they are eligible and which costs the funding covers.

If your organisation meets the requirements to be treated as a smaller authority, it will automatically fall under the SAAA regime unless it opts to be treated as a ‘full audit authority.’

PSAA contracts with supplier firms to deliver audits for organisations that require an audit under the Local Audit and Accountability Act 2014.

Your organisation is covered by PSAA’s contractual arrangements for any financial years where an audit under the Code of Audit Practice is required. If your organisation has previously chosen to be a ‘full audit authority’ then it can decide to prepare accounts and change to being treated as a smaller authority through SAAA’s regime at any time.

If your organisation is not an MLA in 2025/26 then a fee should not be charged as long as you do not also administer a pension fund that is an MLA. The MLA definition applies to the accounts of local authorities that administer pension funds, thus in this case a fee would be charged. Under the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014, MLA-relevant authorities include those maintaining a pension fund with either more than 20,000 members or gross assets exceeding £1,000 million.

Once appointed, auditors are independent and the decisions they take are down to their professional judgements. There may be differences in judgement between years by individuals from the same firm as views change or where more evidence becomes available.

Local audit regulations require PSAA to set the fee scale before 1 December of the financial year to which the audit fees relate. This deadline often precedes full visibility of the impact of any changes.

If a change in audit requirements is substantial and we can reliably estimate the additional fees, we will incorporate them into the fee scale as soon as possible. Please note that we do not include contingencies within scale fees.