Hertfordshire County Council faces ‘substantial increase’ in audit fees

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Hertfordshire County Council’s latest audit fees are almost three times higher than those for the previous year, it has emerged.

For the audit of 22/23 accounts the ‘scale’ fee for the county council was £124,000 – with a further £29,000 for the pension fund.

But, according to a report presented to the council’s audit committee on Wednesday (22 May), ‘scale’ fees for the audit of the 23/24 accounts will increase to £354,000 and £92,000.

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Overall that’s an expected increase of £293,000 – making the estimated 23/24 fee almost three times higher than the previous year.

The increases were revealed at a council meeting last month.The increases were revealed at a council meeting last month.
The increases were revealed at a council meeting last month.

In addition, the report says there will be further charges in relation to new auditing standards – which are expected to fall between five and 10 per cent range of the ‘scale’ fee.

The increase in fees coincides with a move by the county council from auditor firm EY to service called KPMG.

But at the meeting it was reported to councillors that the fees are not set by KPMG – but by the Public Sector Audit Appointments (PSAA).

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An officer’s report said the increase was anticipated and reflects the increased audit work needed to deliver audits compliant with the Code of Audit Practice.

At the meeting, the increase in the fees was raised with KPMG representatives by Liberal Democrat Cllr Mark Watkin.

“The audit fees are going up through the roof this year,” said Cllr Watkin.

“And I’m assured by our finance team that this is because greater resources were needed by the providers of audit to be able to deliver the service that was expected from them.

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“So has that actually materially reflected in the fact you have bigger teams working now with us?

“What does it mean to us that you’re being paid significantly more to deliver a service that had been done by other bodies – the same service but significantly cheaper previously?”

In response Tim Cutler, from KPMG, pointed to the need to “really invest” in the local audit process.

And he suggested that the increase was a “catch-up” after incremental increases in other sectors where auditors are involved.

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He said: “In terms of it’s a lot more than what you received before, I think you know the question back would be how do you asses the quality of that service that has been received before, around timeliness, capacity to respond etcetera?

“I think that’s one of the main reasons prices have increased how they have is because those resources just weren’t there.

“There has been a need to really invest in the local audit process on both sides to be honest to enable us to respond to the complexity that the audit process needs now.

“I think combined with that if you look back to when the prices were last agreed – which I think was about 2017 the last process ran – the auditing profession looked incredibly different.

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“And I think whilst it is to the PSAA’s credit that they kept quite a strong grip around prices through the life of that contact, it probably didn’t keep pace with what was happening out with the PSAA regime in other audit sectors.

“So I think what you have effectively seen is a catch-up of what happened on a more incremental basis in other sectors where auditors are involved. “