The Local Audit (Amendment of Definition of Smaller Authority) Regulations 2025
These regulations amend the Local Audit and Accountability Act 2014, redefining 'smaller authority' based on gross income and expenditure.
For financial years starting after April 1st, 2024, the threshold increases from £6.5 million to £15 million.
The changes aim to provide greater financial flexibility for local authorities while maintaining appropriate levels of financial scrutiny.
The regulations apply to England and Wales and were approved by both Houses of Parliament.
Arguments For
Increased Financial Flexibility for Local Authorities: Raising the threshold for 'smaller authorities' could free up resources and administrative burdens for more local authorities, allowing them to focus on core services.
Alignment with Inflation and Economic Growth: The adjustment reflects the increased costs and revenue streams experienced by local authorities since 2014, avoiding potential administrative difficulties due to outdated thresholds.
Streamlined Audit Processes: By modifying the definition of smaller authorities, the government might streamline audit processes, reducing costs and improving efficiency for both authorities and auditors.
Legal Basis in the Local Audit Act 2014: The amendments are made under the explicit power granted by Section 6(5) of the Local Audit and Accountability Act 2014, ensuring legal compliance and justification for the changes.
Arguments Against
Potential for Oversight Gaps: Increasing the threshold might lead to fewer authorities falling under stricter audit scrutiny, potentially increasing the risk of financial irregularities or mismanagement going undetected.
Unequal Treatment of Authorities: The new threshold could create unequal treatment between authorities with similar financial situations but falling on either side of the threshold, impacting resource allocation and fairness.
Implementation Challenges: Local authorities may need time to adjust to the new definition and the accompanying changes in audit requirements, leading to potential administrative issues.
Unintended Consequences for Accountability: A broader definition of 'smaller authority' might unintentionally reduce transparency and accountability in local governance. While maintaining flexibility, the potential loss of scrutiny should be considered.
Citation, commencement and extent 1.
(1)
These Regulations may be cited as the Local Audit (Amendment of Definition of Smaller Authority) Regulations 2025 and come into force on the day after the day on which they are made.
(2)
These Regulations extend to England and Wales.
Section 1 details the citation, effective date, and geographical scope of the regulations.
The regulations are officially titled "Local Audit (Amendment of Definition of Smaller Authority) Regulations 2025" and take effect the day after their enactment.
Their application is limited to England and Wales.
Amendment of the Local Audit and Accountability Act 2014 2.
For section 6(2) (meaning of “smaller authority”) of the Local Audit and Accountability Act 2014, substitute—
(2)
The qualifying condition is met for a relevant authority and a financial year—
(a)
beginning on or before 1st April 2024, if the higher of the authority’s gross income for the year and its gross expenditure for the year does not exceed £6.5 million;
(b)
beginning on or after 1st April 2025, if the higher of the authority’s gross income for the year and its gross expenditure for the year does not exceed £15 million.”.
Section 2 amends the definition of 'smaller authority' within the Local Audit and Accountability Act 2014.
The amendment modifies section 6(2), establishing a new threshold.
For financial years starting before April 1st, 2024, the threshold remains at £6.5 million.
However, for financial years starting on or after April 1st, 2025, the threshold increases to £15 million, based on the higher of the authority's gross income or expenditure.
Signed by authority of the Secretary of State for Housing, Communities and Local Government
Alison McGovern
Minister of State
Ministry of Housing, Communities and Local Government
16th September 2025
This section contains the signature of the Minister of State at the Ministry of Housing, Communities and Local Government, signifying the formal approval and enactment of the regulations.
The date of signing is September 16th, 2025.
Explanatory Note
(This note is not part of the Regulations)
These Regulations amend the definition of “smaller authority” in section 6 of the Local Audit and Accountability Act 2014 (“the 2014 Act”).
Under section 6 of the 2014 Act, a relevant authority (as defined in section 2 of the 2014 Act) is a smaller authority for a financial year if the ‘qualifying condition’ (set out in section 6(2)) is met in respect of that financial year, or in either of the two prior financial years, where relevant. Regulation 2 of these Regulations provides that in respect of a financial year beginning on or after 1st April 2025, the ‘qualifying condition’ is that the higher of the authority’s gross income and gross expenditure for that year does not exceed £15 million. In respect of a financial year beginning on or before 1st April 2024, the qualifying condition remains that the higher of the authority’s gross income and gross expenditure for that year does not exceed £6.5 million.
A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, public or voluntary sectors is foreseen.
The explanatory note summarizes the regulations' changes without legal effect.
The note clarifies that the amendment affects the definition of 'smaller authority' in the 2014 Act by updating the financial threshold.
It highlights the different thresholds for financial years before and after April 1st, 2025.
Finally, it mentions that a full impact assessment was deemed unnecessary due to the lack of anticipated significant effects on various sectors.