Public Sector Audit Appointments Ltd (PSAA) has completed its procurement of audit services on behalf of 470 opted-in local government, police and fire bodies (99 per cent of eligible bodies).
Five-year contracts, commencing with the audit of 2023/24 accounts, have been let to six suppliers – Azets, Bishop Fleming, Ernst & Young, Grant Thornton, KPMG and Mazars.
The procurement has taken place against the challenging backcloth of a troubled audit profession, a turbulent market, and a local audit system that is facing unprecedented difficulties, including large volumes of delayed audit opinions.
Recruitment, retention and regulatory risks are persistent concerns for suppliers.
The procurement has been protracted because of the limited supply capacity available in the market.
Only 10 audit firms are currently registered to undertake local audits in England, three of which opted not to take part in this procurement.
While we are relieved to have secured sufficient capacity to meet the sector’s needs through to audits of 2027/28 accounts, the outcome of the procurement will result in a significant increase in audit fees.
The bid prices submitted by successful firms will lead to an unavoidable major reset of fees in 12 months’ time.
At this stage, our advice to councils and others is to anticipate an increase of around 150 per cent on the total fees for 2022/23.
We appreciate that an increase of this scale will pose a significant funding challenge for local bodies already facing a daunting range of financial pressures.
We have raised this concern with the Department for Levelling Up, Housing and Communities for consideration, and the LGA has indicated that it will be seeking support from government to help fund these additional costs.
In our view, it is critical that efforts to strengthen the local audit system are redoubled to ensure that the equivalent procurement in five years’ time takes place against a much more stable backcloth and in a much more competitive market.