The Local Audit (Major Local Audit) (Amendment) Regulations 2025
The Local Audit (Major Local Audit) (Amendment) Regulations 2025, effective August 17, 2025, amend the 2014 Local Audit Regulations.
The key change increases the financial threshold for designating a local authority audit as 'major'.
For financial years starting after April 1st, 2025, this threshold rises to £875 million (from £500 million).
This adjustment applies to England and Wales only, impacting local governance and financial accountability.
Arguments For
Improved Efficiency: Raising the threshold for major local audits may streamline the audit process for smaller authorities, reducing costs and administrative burdens.
Focus on Larger Authorities: The change allows for greater focus on audits of larger authorities posing potentially higher risks.
Alignment with Financial Reality: The threshold adjustment reflects changes in the financial landscape since the original regulations were enacted.
Legal Basis: The amendments are made under the powers granted by the Companies Act 2006 and the Local Audit and Accountability Act 2014, providing a clear legal foundation for the changes.
Arguments Against
Reduced Scrutiny: Increasing the threshold could lead to reduced scrutiny of smaller authorities, potentially increasing the risk of financial irregularities going unnoticed.
Disproportionate Impact: The change may disproportionately affect smaller local authorities, who may face challenges with limited resources even if they are below the new threshold.
Lack of Transparency: The absence of a full impact assessment might not fully capture the impact on different levels of local government.
Unintended Consequences: Increasing the threshold could lead to unforeseen consequences, such as shifting financial activities to avoid being classified as a major audit.
- Citation, commencement and extent (1) These Regulations may be cited as the Local Audit (Major Local Audit) (Amendment) Regulations 2025 and come into force on 17th August 2025. (2) These Regulations extend to England and Wales.
This section provides the title and effective date (August 17, 2025) for the new regulations.
It also specifies that the regulations only apply to England and Wales.
- Amendment of the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014 In regulation 12(1) of the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014— (a) in the opening words of paragraph (1)— (i) for “any” substitute “a”; (ii) for “either” substitute “any”; (b) for paragraph (1)(a), substitute— “(a) for a financial year— (i) beginning on or before 1st April 2024, the higher of the relevant authority’s total income (from all sources) for that financial year and its total expenditure (from all sources) for that financial year exceeds £500 million; (ii) beginning on or after 1st April 2025, the higher of the relevant authority’s total income (from all sources) for that financial year and its total expenditure (from all sources) for that financial year exceeds £875 million;”.
This section details the specific amendments made to regulation 12(1) of the 2014 Local Audit Regulations.
Minor wording changes are made in (a), clarifying wording.
The major change (b) modifies the financial threshold defining a 'major local audit'.
The threshold is £500 million for financial years up to April 1st, 2024, and increases to £875 million from April 1st, 2025.
This is determined using the higher of the authority's total income or total expenditure.
Explanatory Note (This note is not part of the Regulations) These Regulations amend the Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014 (S.I. 2014/1627). Regulation 2 of these Regulations provides that in relation to a financial year beginning on or after 1st April 2025, an audit of the accounts of a relevant authority (as defined in section 2 of the Local Audit and Accountability Act 2014 (c. 2)) is a “major local audit” if the higher of the relevant authority's total income and total expenditure for that financial year exceeds £875 million. A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.
The explanatory note summarizes the regulations' purpose and impact.
It clarifies that the regulations amend the 2014 Local Audit Regulations.
The note focuses on the increased threshold for major local audits starting April 1st, 2025.
It also notes that a full impact assessment was deemed unnecessary due to the anticipated minimal impact on various sectors.