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UK ministers are set to force hundreds of local councils and public authorities in England to publish overdue accounts by the end of September as part of efforts to clear an “unacceptable” backlog of outstanding audit opinions in the sector.
The Department for Levelling Up, Housing and Communities on Thursday set out plans to introduce a “statutory backstop” — a mechanism that would compel bodies such as councils and fire services to finalise more than 700 sets of outstanding accounts by September 30, even if external auditors are unable to give them a clean bill of health.
The proposal, made in a government consultation paper, comes as concern mounts about the financial health and oversight of public bodies in England after several local councils became embroiled in scandals or declared effective bankruptcy in recent years.
Last year, the cross-party House of Commons public accounts committee called on ministers to “urgently” address the audit backlog, which dates back to 2015-16, after finding that just 12 per cent of public body audits were completed on time in 2022.
Describing the build-up as having reached “an unacceptable level”, DLUHC said the number of sets of audited accounts still outstanding peaked at 918 in September last year and stood at 771 at the end of 2023.
Ministers are also proposing a series of “statutory backstop” dates covering the financial years up to and including 2027-28 in order to “rebuild assurance that enables [auditors] to issue unmodified opinions in the future”.
Under the plans, external auditors would be told to issue opinions based on the work they had completed by the backstop dates, which might lead to more “modified or disclaimed” opinions. This is because auditors will not wait to receive enough information to provide a “clean” audit opinion.
Some local officials have, however, blamed the backlog in part on cuts to funding from central government. In its report in June last year, the PAC also noted that the market had been severely constrained, with fewer than 100 “key audit partners” registered to carry out the work across England.
Alongside the government’s latest intervention, the National Audit Office, the public spending watchdog, is also holding consultations on changes that would require local auditors to adhere to the backstop dates by giving their opinions in time for accounts that have been signed off to be published.
Since 2015, private sector audit firms have been responsible for checking the books of local government bodies after ministers scrapped the Audit Commission, the public body that previously carried out the work.
Sarah Rapson, head of supervision at the Financial Reporting Council, the audit and accounting watchdog, said: “Timely and transparent financial reporting and audits are vital for accountability and effective decision-making in local government.
“The concerning backlog of unaudited accounts undermines this, so we must act decisively to bring the system back to a standard the public deserves,” she added.
