Recommendation 3

We remain concerned that failures in the English local audit market are resulting in poorer quality data for Central Government, and are at risk of spreading to other sectors. The system of local government audit is close to breaking point, with over 630 accounts, some of which date as far back to 2015–16, yet to be signed off by auditors by the end of November 2022. Delays to local audit reduces transparency over approximately £100 billion of local government spending, and also impacts other areas of government spending, such as the NHS. We have previously found that the delays to assurance on the accounts of the Local Government Penson Scheme contributed to delays of four to five months on certifying the accounts of Ministry of Justice and the Department for Digital, Culture, Media & Sport. As part of the 2021 Spending Review, HM Treasury has allocated an additional £40 million to support local government bodies in responding to new auditing requirements and implementing the recommendation of the Redmond review. Despite this, performance continues to deteriorate, with just five of 467 local government entities meeting the statutory deadline for publication of their 2022–23 audit opinions. Recommendation 3: HM Treasury should write to the Committee by the end of February 2024 to explain how it is engaging at a senior level with the Department for Levelling Up, Housing and Communities, and the Financial Reporting Council, to ensure that they have a credible plan to resolve the local audit crisis.