‘Government response to the consultation on changes to the audit fees methodology for allocating £15 million to local bodies’ has been published. Some 548 principal bodies will have access to £15m in grant funding to assist them in financing increased audit fees as the government attempts to improve audit standards.
The new funds are part of the government’s response to the independent review by Sir Tony Redmond into the effectiveness of external audit and transparency of financial reporting in local authorities.
The additional funding in 2021/22 is to support local bodies to meet the anticipated rise in audit fees in 2021/22. The rises are:
- Driven by new requirements on auditors including the 2020 Code of Audit Practice.
- To enable local authorities to develop standardised statements of service information and costs.
The outcome will see funds allocated on each body’s scale fee as a proportion of the total fee scale that each body currently pays as part of the current contracts. The sector is dominated by larger accounting companies and business expansion for local practices is likely to be limited to developing support audit services.
A series of government consultations have examined local authority auditing amid concerns over transparency and accuracy. Pressures on finances due to central government cuts, COVID-related costs and more complex investment products have all added to the auditing pressures on local government bodies which include councils, emergency services and transport groups.
In October last year, the Financial Reporting Council (FRC) reported that 60% of English local authority audits it had reviewed did not meet its required standards.
The Redmond Review recommended that:
- The current fee structure for local audit should be revised to ensure that adequate resources are deployed to meet the full extent of local audit requirements.
- There should be a new audit regulator for local authority accounts.
- There should be longer deadlines for delivering audited financial statements.
- Increased fees for auditors.
In March 2021, the government amended the Accounts and Audit regulations to extend the publication deadline for audited local authority accounts from 31 July to 30 September for two years up to the 2021/22 financial year.
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