Need to come to pragmatic solution to audit backlog is urgent, councils say

Government proposals to tackle the backlog in local authority audit “will be hard for local authorities to deal with” but must be supported as “the best opportunity for resolving the situation”, the Local Government Association (LGA) has said.

In its consultation response, the LGA said local audit was “in crisis” and it had pressed the Government to set a firm timetable to restore timely auditing.

The Government has said the backlog in publication of audits “has grown to an unacceptable level” with a peak of outstanding opinions of 918 on 30 September 2023 at 918, which by 31 December 2023 stood at 771.

Local authorities were audited through the Audit Commission until its abolition in 2015, after which they were left to appoint their own auditors, but too few audit firms have been interested in the work.

The LGA said taxpayers and residents were entitled to feel full confidence in local authority accounts “and this is currently not being delivered due to delays in finalising audits. The need to come to a pragmatic solution to the backlog is urgent”.

It warned though that this should not lead to reputational damage for councils “as a result of a problem that is not of their making”.

Under Government proposals there would be deadlines set for annual audits until 2028, by when it is assumed the system will have caught up.

Authorities would have to ensure that by 30 September 2024 they have published audited accounts for financial years 2015-16 to 2022-23.

Since this would be contingent on an audit opinion being issued in time, the Government has proposed the Code of Audit Practice should be amended so that auditors are required to issue their opinion in time for the authority to publish its accounts by this date. It would also disapply the duty to publish a delay notice if an audit has not been concluded before the date specified.

The Government consultation paper stated: “The proposal to set the backstop date at 30 September 2024 reflects the need to ensure sufficient time for auditors to issue opinions, including modified or disclaimed opinions due to the backstop, and for bodies to publish accounts containing those audit opinions once the legislation has come into force.” 

For financial years 2023-24 to 2027-28, a series of deadlines would be set ending on 30 November 2028.

The LGA called for wider simplification of local authority audit including for the measurement of operational property, plant and equipment, and more proportionate reporting on pensions.

It said: “There is a real risk that without simplification, the back stop proposals will result in permanent disclaimers to audit opinions due to lack of audit firm capacity, if so, this will fatally undermine the audit function.”

Mark Smulian