Understanding the Local Audit (Amendment of Definition of Smaller Authority) Regulations 2025

In a move to streamline financial scrutiny and ease administrative burdens, the UK government is redefining what constitutes a "smaller authority" in local audits. This change, effective from April 1, 2025, raises the threshold for smaller authorities from £6.5 million to £15 million in annual income or expenditure.

Why the Change?

The core idea behind this adjustment is to ensure that smaller local bodies, such as councils, aren't overburdened with extensive auditing processes more suited for larger entities. By increasing the threshold, many smaller authorities will now only need to submit an Annual Governance and Accountability Return (AGAR) instead of undergoing full audits. This change is expected to save public money, reduce administrative pressures, and allow auditors to concentrate on larger entities where the risk and responsibilities are higher.

Policy Background

Previously, the threshold for defining smaller authorities had remained unchanged since 2014. Over time, many smaller entities found themselves briefly exceeding the £6.5 million mark due to one-off grants or temporary bumps in income, necessitating a costly and extensive audit process. The new £15 million threshold aims to mitigate such situations, providing a more proportionate approach to local audits.

Consultation and Support

The decision follows a comprehensive consultation process conducted by the government in late 2024. Of the 239 responses received, a majority supported the increase in the threshold, recognizing the benefits of reducing the financial and administrative load on smaller authorities.

Impact and Implementation

This legislative update is primarily focused on public sector entities and does not impact businesses, charities, or voluntary organizations. The Ministry of Housing, Communities and Local Government (MHCLG) will be monitoring the implementation of this new regulation to ensure it meets its intended goals of efficiency and proportionality.

In summary, the 2025 regulations reflect a significant shift towards a more efficient local audit system, better aligned with the capacities and needs of smaller public bodies. This move is part of a broader government strategy to overhaul the local audit framework, ensuring public funds are managed effectively without unnecessary bureaucratic hurdles.