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The state of Local Audit
- Delays and a growing backlog of unaudited accounts have overshadowed local government audit for too long. An initial report by Sir Tony Redmond in September 2020, reports by the National Audit Office, and the work and reports of the Public Accounts Committee and the Housing, Communities and Local Government Committee (or equivalent) together with Departmental and Ministerial Statements have provided background information and identified potential solutions. Our written evidence to the Levelling Up, Housing and Communities Committee inquiry on Financial Reporting and Audit in Local Authorities in April 2023 provides a chronology of how the situation developed.
- July 2023 and then February 2024 saw the issuing of ministerial statements bringing forward proposals to tackle the backlog with a three phase reset, recovery and reform process. This was intended to clear the historical backlog of opinions by introducing a statutory backstop date, provide a period of recovery to rebuild assurance whilst the reforms necessary to address the systemic challenges were addressed.
- The new Government announced in July 2024 that it would continue with plans for the reset and recovery phases with the introduction of statutory backstop dates for all audit years to 2027/28. It also decided that an overhaul of the local audit system was needed to deliver the reforms required ‘to enable taxpayers to get better value for money’. This was a commitment that we strongly supported.
- Revisions to the Accounts and Audit Regulations and a revised Code of Audit Practice were laid in September 2024 to give legal effect to backstop measures to deal with the backlog. This set a date of 13 December 2024 by which remaining opinions for all years to 31 March 2023 should be given. The need to clear the backlog with widespread disclaimed audit opinions is a painful reminder of the consequences of the failure of the local audit system.
- On 18 December 2024 the Ministry of Housing, Communities and Local Government (MHCLG) launched their consultation on local audit reform – A strategy for overhauling the local audit system in England.
- We welcome the strategy detailed within the consultation which provides a vision of a more cohesive system where local audit is geared to the needs of the sector, providing assurance over public money and reporting promptly where there are concerns. However, the strategy also highlights the extent of the change that is needed, the difficult decisions that lie ahead and the hard work that will be needed to implement them effectively. We have published our response.
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