Recommendation 34

We sought clarity from the Department on whether, if fees went up, it would look to reflect the increase in the settlement for local government. The Department responded that is had put in more money this year for affected bodies, rather than going directly to audit firms.97 The Department reported that it was taking action to address the decline in audit fees. It was consulting on changes to the regulations that set the fees for auditing local authorities to enable the fees to be set at a closer time to when the audit was done, and so that variations in fees can respond to changes in the audit work required. In the meantime, the Department was consulting on how to allocate an additional one-off £15 million towards the costs of 2021–22 audits.98 EY told us that the sector welcomed the announcement of the further £15 million, as this would go some way to address the imbalance between the cost of delivering the audits with the specialist skills required, and the fees earned. EY added that it was responding to the Department’s consultation with the view that £15 million be shared in an equitable way with the audit firms facing higher costs of auditing local authorities with increased complexity, rather than those auditing simpler bodies.99 97 Q 9 evidence session of 20 May 2021 98 Qq 6, 10 evidence session of 20 May 2021; C&AG’s report, para 1.16 99 Q 15 evidence session of 17 May 2021 20 Local auditor reporting on local government in England