Recommendation 3

The timing and delivery of local government reforms remain unclear. The local government audit crisis stems from long-standing issues, including fragmented system ownership, limited audit and finance capacity, rising regulatory demands, overly complex accounts and financial reporting requirements, and the low profitability of local audit work. To address delays and improve transparency, statutory deadlines (“backstop dates”) were legislated for on 9 September 2024, requiring audited local authority accounts to be published by set dates. These deadlines aim to accelerate audit completion, reduce the backlog, and restore confidence in timely financial reporting. However, whilst the backstop is increasing the number of accounts brought to completion, it is also resulting in a higher number of disclaimed opinions, leaving an assurance gap over the data included within these accounts. Further reform followed on 18 December 2024 with the Local Audit Reform Strategy, which includes provisions in the English Devolution and Community Empowerment Bill to establish a Local Audit Office as a unified oversight body. While MHCLG aspires to eliminate qualified or disclaimed accounts by 2027–28, its reliance on vague ambitions without clear milestones makes progress difficult to assess. MHCLG officials have been over-optimistic before about how quickly audit timeliness could be improved. It will be important that the Treasury does not underestimate the impact of local government reorganisation on the Whole of Government Accounts. 4 recommendation a. MHCLG should provide, alongside the Treasury Minute response, a document which sets out: • the actions already taken to address the local audit crisis, including milestones achieved to date, • Key dates and deliverables that remain outstanding, with clear evidence of how these will be met, • Further measures the department intends to implement to ensure resolution, including how it will ensure that auditors build back assurance in a tim