Changes to the Audit Fees Methodology for Allocating £15 Million to Local Bodies

Overview

Sir Tony Redmond, in his review of the effectiveness of external audit and transparency of financial reporting in local authorities, recommended that the current fee structure for local audit be revised to ensure that adequate resources are deployed to meet the full extent of local audit requirements. In the Government’s 17 December response , the Government committed to take swift action to support market stability, and in particular to take action to review and reform regulations to provide the appointing person with greater flexibility to ensure the costs to audit firms of additional work are met, and reduce the need for time consuming case-by-base consideration.

To support the implementation of this, in the Government response to the Review, Ministers announced £15 million in additional funding in 2021/22. This is intended to support affected local bodies to meet the anticipated rise in audit fees in 2021/22, driven by new requirements on auditors including the 2020 Code of Audit Practice, and to enable local authorities to develop standardised statements of service information and costs,

This short consultation sets out a proposed simple methodology but also seeks views on whether this is the most equitable way in allocating the funding between principal bodies.

We are also consulting separately on the implementation of changes to the fee setting process for principal bodies set out in the Local Audit (Appointing Person) Regulations 2015, as recommended in the Redmond review, to a 6 week timescale, seeking views on amending the timescale for setting the fee scales, enabling the appointing person to consult on and approve a standardised additional fee – subject to consultation – and for such payments to be made in year rather than at the completion of the audit.  the consultation also seeks to clarify some details around the appointment of auditors and the length of that appointment period as well as any more general comments. This consultation can be found here.