Source · Select Committees · Public Accounts Committee
Recommendation 15
15
Accepted
MHCLG plans Local Audit Office creation to centralise oversight, though LGA expresses reservations
Conclusion
MHCLG has announced its intention to create a Local Audit Office (LAO) that will support with the interpretation of international standards for local authority audits.30 The proposed remit of the LAO was included in MHCLG’s strategy published in December 2024 that outlines how it will overhaul the local audit system in England. In this strategy MHCLG stated that the government accepts the Remond and Kingman review’s recommendations for a new oversight organisation.31 The LAO will have five strategic responsibilities: coordinating the system, contract managing, code of practice, oversight, and reporting, insights & guidance.32 MHCLG noted that the local audit office will contribute by centralising several responsibilities to address the current fragmented oversight of the sector.33 We questioned what actions would be taken to prevent a reoccurrence of the issues seen in the market, to which the Treasury stated that the local audit office would be able to support improved audit capacity to prevent a reoccurrence.34 The LGA told us it needed to be convinced that such a new organisation would tackle the problems that exist in the sector. It stated that structural 26 Q 11 27 Q 48 28 Q 49 29 Q 29 30 Q 29 31 Local audit reform: a strategy for overhauling the local audit system in England - GOV.UK 32 Local audit reform: a strategy for overhauling the local audit system in England - GOV.UK 33 Q 25 34 Q 47 12 change on its own will not be enough, and that there is an urgent need to restore confidence in the local audit arrangements, restore timely audits permanently, and improve financial reporting.35 Oversight of local government finances
Government Response Summary
The government stated that the recommendation is already implemented as of May 2025, detailing actions taken by MHCLG to establish the Local Audit Office and address the local audit backlog, disagreeing that it has taken too long.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented: May 2025. MHCLG has written to the Committee alongside the publication of this Treasury Minute. The government does not agree with the Committee’s conclusion that it has taken too long to put these plans in place. Following the election, which led to a change in approach, the government took decisive action. In July 2024, it announced six statutory backstop dates, two of which have already passed, to clear the local audit backlog and allow the system to recover. In December 2024, it launched a strategy to overhaul local audit, and in April 2025, it announced 16 further commitments to streamline and fix the fragmented system.