Recommendation 2

The Treasury and MHCLG have plans to try and fix the crisis in local authority audit arrangements, but it has taken too long to put these plans in place. The number of missing and unaudited bodies had increased consistently since 2019–20. The Kingman review in 2018 and the Redmond review in 2020 concluded that local authority audit arrangements needed to be rethought and the previous Public Accounts Committee raised concerns several times in recent years about the state of local authority audit arrangements. To address the issue the government legislated on 9 September 2024 to implement a series of statutory deadlines, or backstop 4 dates, by which the audits of English Local Authority accounts must be complete. The first backstop date to complete audits of accounts relating to the 2022–23 financial year was set at 13 December 2024, with a further five dates covering audits up to the 2027–28 financial year. Furthermore, MHCLG published its strategy for overhauling the local audit system in England in December 2024. This committed to a series of measures to fix the crisis in local audit, including the establishment of a statutory and independent Local Audit Office (LAO) to consolidate fragmented powers and responsibilities into one body to support the sector. It is not clear whether there will be sufficient private sector audit capacity to deliver the remit of the LAO, whether public sector involvement is being considered or how the strategy will address how local authorities should apply international financial reporting and audit standards. Following a previous recommendation of this Committee in 2024, the Treasury is conducting a pilot, due to complete this year, to test an approach to aligning financial year–end dates for academies and further education colleges in order to avoid further qualifications. recommendation Alongside the Treasury Minute response to this report: a. MHCLG should write to the Committee setting out key dates relating to resolution of the l