Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Accepted
Late local audits hinder financial assurance and risk identification for councils.
Conclusion
The audit process provides a key element of assurance for financial planning, budgeting and management in local government bodies and accountability for £100 billion of spend, but this only works effectively when audit work is timely. We pressed the Department on the danger that late audits pose to highlighting risks in local authorities. The Department agreed these risks were real but highlighted other ways for auditors to sound the alarm sooner where the accounts are not closed.23 Examples include making a statutory recommendation to the audited body requiring a public response or issuing a Public Interest Report, as was the case at the London Borough of Croydon in October 2020.24
Government Response Summary
The government agrees with the committee's observation and is undertaking cross-system work to address the backlog of local audit opinions. It also reminded local authority chief executives of their role in timely financial reporting and emphasized that auditors must continue to use existing statutory powers to highlight concerns early.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 As set out above, Minister Rowley has written to the Levelling-Up Committee to update on urgent cross-system work to address the backlog of local audit opinions and mitigate the impact of delays on local bodies going forward. This will help to ensure the system gets back on track which will in turn minimise the negative impact on other government departments and the Whole of Government Accounts. 2.3 The department also wrote to local authority Chief Executives and S151 Officers (Chief Financial Officers) in March 2023 highlighting their critical role in delivering timely, high-quality financial reporting. The letter set out how both the annual auditor’s report to the Audit Committee and Full Council and S151 Officers’ responsibility to report any concerns on the authority’s ability to deliver high-quality draft financial statements by the statutory deadline provide an important accountability mechanism for the taxpayer. 2.4 DLUHC does not rely entirely on audit for the assessment of risk; audit is only one part of the local control framework. The department regularly monitors the financial health of local authorities using a wide range of data including income and expenditure data and reserves levels, as well as through extensive direct engagement with councils. Minister Rowley’s letter to the Levelling-Up Committee also emphasises that auditors must continue to meet their statutory duty to report on value for money (VfM) arrangements in addition to using the existing statutory powers at their disposal to highlight concerns at an early stage.