Accountancy, auditing and local authority bodies have widely welcomed the launch of a consultation by the UK government on reforming the local audit system.
The move comes with the system of assurance and governance in place to oversee local authority finances in disarray. In November, the National Audit Office (NAO) took the unprecedented step of refusing to sign off the governmentâs entire public accounts for 2022/23, saying it could not certify the figures as accurate and reliable because hundreds of local council, police and fire authorities had yet to have their accounts audited.
Mirroring a similar crisis in the judicial system, the backlog in local authority financial audits dates back to the COVID-19 pandemic. Delays and financial strains caused by the pandemic have snowballed since, with the Ministry of Housing, Communities and Local Government stating that the number of overdue audits would reach 1000 by the end of 2024.
In 2023, just 1% of public finance audits were completed on time.
Structural reform
The latest plans put out for consultation follow the tabling of emergency legislation in September that set a series of âbackstopâ dates for overdue audits to be completed by, starting in December. But with some authorities struggling to even find an external auditor to undertake the process, itâs recognised that deeper structural reform is required on top of clearing the backlog.
Problems with the system were flagged as far back as 2020 in a government-commissioned independent review by Sir Tony Redmond. That reviewâs recommendations included widespread simplification of the system, ranging from creating a new oversight body to take on duties currently discharged by the likes of the Institute of Chartered Accountants in England and Wales (ICAEW) and Financial Reporting Council (FRC), to standardising the statement of service information and costs.
The current consultation, launched on 18th December, picks up directly from the Redmond recommendations in proposing the establishment of a Local Audit Office (LAO) with statutory responsibility for coordinating all public sector assurance and financial governance, managing the contracts of external auditors, owning and implementing the Code of Audit Practice, quality oversight and reporting.
As well as seeking views on the role of the LAO and a proposed strategic âvisionâ for local auditng going forward, the consultantion covers the simplification of financial reporting requirements for local authority bodies, ways to enhance capacity and capability in the local audit sector, and strengthening the relationship between local bodies and auditors.
The consultation has been welcomed by bodies including the ICAEW, the Chartered Institute of Public Finance and Accountancy (CIPFA) and Society of Local Council Clerks. It is due to run until 29th January 2025. You can take part in the consultation by completing an online survey here.
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