PSAA survey exposes fee friction and legacy backlogs in local audit recovery

Public Sector Audit Appointments Limited (PSAA) has published the results of its annual client survey for the 2024/25 audit year. Revealing a local audit sector cautiously recovering from years of severe operational friction, yet still grappling with underlying structural strains.

While overall satisfaction and completion rates across opted-in public bodies show a marked improvement, feedback from local finance leaders underscores persistent frustration with fee variations, resourcing gaps, and the ongoing challenge of clearing legacy audit backlogs.

Here is a breakdown of what the latest PSAA findings tell us about the current state of UK local government audit and what finance directors need to know.

1. Headline Satisfaction Metrics: A Divided Picture

The survey data split between the main independent Local Government Association (LGA) survey and PSAA’s tailored survey targeting bodies missing the 31 March 2026 audit opinion deadline presents two distinct operational realities.

For bodies within the main scheme, operational alignment has rebounded significantly from historic lows. However, for bodies experiencing delayed opinions, satisfaction with audit execution showed notable slippage among senior finance leadership.

Alignment with Audit Plan Expectations

Local Audit Satisfaction Up, But Backlog Headaches and Fee Friction Persist: PSAA Survey Analysis

While 86% of Directors of Finance in the wider cohort felt audit delivery aligned with initial plans, that figure dropped to 70% among them in the delayed cohort. The divergence highlights how quickly relationship management strains when timelines begin to slip.

2. Legacy Backlogs Remain the Dominant Bottleneck

For public bodies missing the late-February and March reporting targets, the primary culprit remains lingering baggage from prior financial years rather than immediate accounting failures.

Among the delayed bodies surveyed (covering audits assigned to Bishop Fleming, EY, Forvis Mazars, Grant Thornton, and KPMG):

• 50% of Directors of Finance and 33% of Audit Committee Chairs cited prior year delays as the main reason for missing their 2024/25 audit opinion.

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• While high, this marks a substantial drop from the previous year’s tailored survey, where 83% of Directors of Finance and 62% of Audit Committee Chairs blamed prior year backlog issues.

• Accounting complexity and technical issues were cited by 33% of Directors of Finance and 67% of Audit Committee Chairs as secondary drivers of delay.

Factors Delaying Local Audit Opinions

Finance leaders also highlighted ongoing operational friction, including late audit queries from engagement teams, resourcing constraints within local finance departments, inquorate committee meetings, and persistent difficulties obtaining signed-off positions from former audit firms following auditor rotation.

3. Communication Strengths vs. Fee Variation Friction

Relationship management metrics show a strong divide between day-to-day auditor engagement and financial transparency regarding audit fees.

The Positives: Direct Communication

• 77% of respondents agreed that auditor communication was timely throughout the audit cycle.

• Auditors scored high marks for acting as an accessible “sounding board” and clearly explaining why opinions could not be rendered ahead of the 27 February 2026 backstop target.

• Governance engagement improved: 100% of responding Audit Committee Chairs in the delayed cohort reported that auditors offered private sessions without council officers present (up from 54% in 2023/24).

The Friction Point: Fee Variations

• Only 61% of respondents felt audit teams effectively explained fee variations or maintained a strict “no surprises” billing approach.

• 38% expressed explicit dissatisfaction, pointing to unexpected fee add-ons linked to technical accounting adjustments, auditing standard changes, and extended testing work.

4. Value for Money (VfM) and System Reform

The survey sheds light on how finance teams view the utility of statutory reporting under the National Audit Office (NAO) Code of Audit Practice, as well as their readiness for upcoming structural reforms.

Perceived Usefulness of Audit Output

While utility ratings for the Auditor’s Annual Report softened slightly, satisfaction with Value for Money (VfM) commentaries increased to 60% among DoFs. Respondents noted that VfM reporting delivers the most value when findings are delivered promptly and tied closely to specific local operational risks rather than generic boilerplate text.

Reform Awareness & The Local Audit Office

With local audit transition plans progressing toward the establishment of the central Local Audit Office, awareness across the sector is relatively high:

• 90% of Directors of Finance and 100% of Audit Committee Chairs reported receiving sufficient information regarding the system overhaul, with audit firms acting as their primary information channel.

• However, 38% of respondents felt under-informed about the exact mechanics of “building back assurance” after backstop dates are applied.

• Free-text feedback from respondents emphasized the urgent need for a recognized “auditor of last resort” mechanism and called for restoration plans that respect the specific financial circumstances of individual local authorities.

What This Means for UK Practice

For finance directors and audit committee chairs across the UK public sector. PSAA’s latest survey confirms that while systemic collapse has been averted, the operational reality on the ground remains demanding.

The improvement in core delivery and communication reflects hard work by both local finance teams and audit firms under taxing conditions. Yet, the persistent tension around fee variations and backlog overhang demonstrates that process stabilization is only the first step.

As the sector prepares for the formal rollout of the Local Audit Office, audit firms must focus on two immediate priorities:

1. Earlier operational engagement to eliminate late-stage technical surprises.

2. Transparent, early communication on scope changes to reduce friction around fee variations.

Achieving timely audits will require a two-pronged effort from local authorities: upskilling internal finance functions and coordinating effectively across rotating audit engagements.