The bid rates submitted in response to PSAA’s 2022 audit services procurement, covering the audits of 2023/24 to 2027/28, reflected a significant increase compared to our previous procurement in 2017. The audit industry has faced major challenges in the intervening period. In addition, local audit faces several distinctive difficulties which have resulted in a less competitive market.
The 2022 procurement outcome required a major re-set of total audit fees for the contract period from 2023/24, resulting in a projected increase of 151% on the fees for 2022/23. The actual total audit fee at any individual body is the scale fee set each year plus any fee variations for additional national or local audit requirements, and so it is variable.
In September 2023 PSAA consulted on the proposed scale of audit fees payable by bodies in respect of the audit of 2023/24 accounts. The consultation set out the additional elements to be included in the scale fees for individual opted-in bodies, including additional audit requirements and the adjustment of 151% for the procurement outcome.
In consulting on the fee scale each year, we consider the factors which may influence the audit work needed. This may include changes in audit requirements, for example revised auditing or financial reporting standards. If the volume of work changes, then the total fee will vary accordingly. For example, if a national or local factor triggers an increase or decrease in the volume of audit work then the fee will vary accordingly. For audits from 2024/25 the audit contracts also require us to consider changes in inflation.
We appreciate that an increase in audit fees poses a significant funding challenge for local bodies already facing a daunting range of financial pressures. We have raised this concern with DLUHC.