Government proposes to streamline “fragmented” local audit system with creation of national body
The Government is to consult on the establishment of a statutory and independent Local Audit Office (LAO) as part of a strategy for overhauling the local audit system in England.
The proposed LAO will have five strategic responsibilities, namely coordinating the system, contract management, ownership of the Code of Audit Practice, quality oversight and reporting. It may also have potential additional functions.
Other measures covered by the consultation include:
- a local audit vision with eight core principles
- mandating audit committees
- simplifying financial reporting requirements “to ensure they are proportionate”
- improvements to enhance capacity and capability in the local audit sector, “such as the introduction of public provision”
- strengthening the relationship between local bodies and their auditor
- reforming the audit regime.
Writing in the foreword to the consultation, Jim McMahon, Minister of State for Local Government and English Devolution, said: “Local audit should be the bedrock of local accountability and transparency, of trust and confidence in councils to spend taxpayer money wisely. But the system is broken – we have lost a key part of our early warning system over local government finances at the time we need it the most.”
He added that the scale of this failure was “epitomised by the backlog of outstanding unaudited accounts which led to a paralysis of local audit”.
Just one per cent of councils and other local bodies published audited accounts on time last year and there is a backlog of nearly 1,000 outstanding audits dating back to 2015/16.
The minister noted that the disclaimer by the National Audit Office in November of the Whole of Government Accounts for financial year 2022/23 - the first time this has happened - served “to further illustrate the dire straits of the system and the contagion caused by the lack of real reform”.
McMahon added: “The challenges faced by all are insurmountable without fundamental reform to drive transparency and open the books. That is why we will streamline our fragmented system into one body, the Local Audit Office.
“The Office will have a focussed and clear remit to lead the required reform and to ensure that local audit, not just for local authorities but the wider system including the NHS, will provide value for money for the taxpayers now and in the future.”
Under the proposed timeline, the LAO would be legally established in Autumn 2026.
The consultation on the strategy, which applies to England only, runs until 29 January 2025.
