Agenda item

Councillor Smith joined the meeting.

The Public Sector Audit Appointments Limited (PSAA) (the successor to the Audit Commission) had produced a consultation document on the proposed scale of fees for 2020/21 in which it was proposed to maintain the fees at the current level of £23.7k with any variation to this being dealt with through local negotiations.

It was not felt that this approach accurately reflected the audit requirements at the present time. Whilst PSAA stated that the impact of some of the changes were likely to vary from one audited body to another, even within classes of similar bodies, it was not believed that this was an accurate reflection of the situation. It was readily acknowledged that fees would vary according to the complexity of organisation and this was already reflected in the base fee, however it was not believed that the fee for changes to asset valuations, or pension liability valuations or the extent of challenge required would vary significantly between one organisation and another, other than to reflect size and complexity which were already taken account of.  As such the opinion was that PSAA should do more to agree the impact of changes to auditing standards at a national level, as opposed to simply passing these discussions onto local negotiation. Therefore after consultation with the Chair and Vice Chair a response was agreed as set out in the report.

Subsequently the PSAA confirmed the scale of fee and that they had commissioned a review of the scale fees framework in 2019 and published the findings of that review.  They highlighted that the current level of scale fees generated significant comment from audit firms, opted?in authorities and other stakeholders and it was a common theme from commenters on public audit.  In most cases, scale fees had reduced by 65% from 2011/12.  The reasons for this included a significant reduction in Audit Commission activity from 2012/13, the transfer of all the Commission’s audit staff to firms, keen pricing from firms in successive procurements, improved audit efficiencies and reductions in PSAA costs.  There was now mounting pressure on fees as the scope of audit and the role of the auditor had come under renewed scrutiny. Recent high-profile corporate failures in the private sector, concerns about the financial resilience of some local government bodies and additional technical requirements had led to an increase in the amount of work auditors were undertaking to discharge their statutory responsibilities. PSAA stated their fee setting process strived to take into account both the needs of opted-in bodies and the need for long-term sustainability of the local audit supply market. Their current review was exploring the arrangements for setting and varying scale fees. The results of this review would be reported to the Board during 2020, and hence should inform future consultations.

RESOLVED:-  That the Audit Committee noted the response to the consultation documents as now considered and the subsequent confirmation that the fee remained at £23.7k, subject to local agreement on any variations.