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Government must act now to fix crisis in local audit, say MPs

24 November 2023

Local audit is in crisis and the Government must take urgent action to fix it, says the cross-party Levelling Up, Housing and Communities (LUHC) Committee in a report published today (Friday).

The Financial Reporting and Audit in Local Authorities report says that the local audit crisis is undermining public trust and that the most urgent problem is “a large and growing” backlog of accounts whose audits have not been completed, some of them up to seven years old. The report finds the crisis in audit is hampering efforts to ensure that the billions of pounds per year spent by councils is properly accounted for and local authorities held accountable for their decisions and spending.

The Committee’s report makes a series of recommendations to help tackle the current audit crisis. The report also proposes a range of measures to help improve local accounts, which are currently “overly complicated to the point of being impenetrable”, to ensure they contain the information needed by the public to hold local authorities to account.

Chair's comment

Levelling Up, Housing and Communities Committee Chair, Clive Betts MP, said: “Local audit is in crisis and the Government must act to fix it. Serious delays in local audits mean that many councils are not fully sighted to problems while they make major financial and service decisions, with audit delays also leaving local taxpayers in the dark.

“The growing backlog of audit opinions seriously undermines efforts to hold councils to account for their financial management. The Government now needs to set out urgently what it will do to clear the backlog, re-establish trust in local audit, and accelerate its efforts to establish a local audit system leader.

“Local public bodies are responsible for billions of pounds of expenditure each year, delivering public services that taxpayers rely on every day. However, the current format and content of accounts are so complicated that they are impenetrable to councillors and council officials, let alone the wider public. The Government should now lead on work with the audit sector to ensure audits and accounts support the oversight of public spending and strengthen local democracy and accountability.”

The report calls for the Department of Levelling Up, Housing and Communities (DLUHC) to move quickly to clear the audit backlog and implement its proposed actions by the end of the calendar year 2023. The report also recommends that DLUHC introduce backstop dates for publishing audit local authority accounts on an annual basis going forwards.

The Committee’s report notes the lack of momentum in bringing forward the legislation to establish the Audit Reporting and Governance Authority (ARGA). The report recommends the Government make it a priority to establish the local audit system leader and ensure this body is the primary contact for local auditors to raise the alarm should they find matters of concern during an audit of a local authority.

Further information

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