Audit costs for local councils in England more than tripled (an average rise of 238%) between 2022/23 and 2023/24, reveals a new report from the Audit Reform Lab, based at the University of Sheffield. Less than one fifth of the rise in costs was due to greater complexity and additional audit work, with the remaining over fourth fifths due to auditors hiking their rates.
The study is the first major comparison of local authority audits in England, Scotland and Wales, and draws on data from approximately 400 councils from 2018-2024. It finds that English councils now pay over double the hourly rates for additional audit work compared with Scottish and Welsh councils, while also facing longer delays for getting their audits signed off.
Audit firms have hiked hourly costs for cash-strapped local councils in England to eye-watering levels, while also failing to sign off accounts. The market is broken, regulation is feeble and the price hikes create a moral hazard where auditors have little incentive to deliver work on time and to budget. English councils are not only getting bad value for money, but weak and delayed audits are also compromising local accountability and national fiscal oversight.
Dr Daniel Tischer
Researcher at the Audit Reform Lab and report author
The report reveals that:
- English audits are more delayed than in Wales and Scotland. 68% of English council audits for the 2022/23 financial year were still outstanding by 30th June 2024 - compared with only 12% and 9% in Scotland and Wales. 59% of 2021/22 English audits were delayed by over 12 months, compared to none in Scotland or Wales.
- Despite these failures, audit costs in England have risen sharply. English audit fee scales increased on average by 238% between 2022/23 and 2023/24. Over the same period, audit costs rose by only 7% in Wales, and fell by 2% in Scotland.
- English local councils face sky-high hourly audit fees for additional work. In England, hourly fees are charged for additional audit work undertaken on top of other agreed scale fee parameters. While hourly fees for English local authorities rose 151% between 2022/23 and 2023/24, fees rose by just over 4.4% on average in Scotland and Wales in the same time period. The rates for Audit Directors in England increased from £165 per hour in 2022/3 to £414 in 2023/4; in comparison, Audit Directors’ hourly rates were £169 in Scotland and £170 in Wales in 2023/4.
In England, the Audit Commission was abolished in 2015, leaving English council audits almost completely under private provision. The Public Sector Audit Appointments (PSAA) sets fee scales in consultation with audit firms, but auditors regularly receive fees that are higher than those scale rates through additional hourly rates. Meanwhile, Wales and Scotland maintain many aspects of the Audit Commission - there is significant public oversight and control of local authority audits. The Labour government’s newly-proposed Local Audit Office (LAO) will bring back some powers previously held by the Audit Commission (e.g. appointing auditors and managing contracts), as well as establishing some provision for public sector audits.
“The fact that Welsh and Scottish audits are cheaper and delays are lower shows that the market doesn’t always deliver greater efficiency,” Tischer adds, “We need a substantive role for public auditing. Labour’s plans to create a Local Audit Office are welcome, but they should further strengthen the Office’s capacity to conduct audits by enabling a 70/30 split of public versus private audits for English councils. This would ensure the Local Audit Office has the expertise and capacity to challenge private interests and protect the public good.”