MPs warn audit backlog threatens transparency over £100 billion spend
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large backlog in auditing accounts throughout native authorities has elevated the danger of extra councils failing financially and undermined accountability for £100 billion of annual spending, MPs have warned.
A report by the cross-party Public Accounts Committee highlights the influence of widespread delays to exterior scrutiny of councils’ monetary well being and concludes the state of affairs may worsen on account of a scarcity of Government motion.
With the identical restricted pool of native auditors additionally working throughout different elements of the general public sector, there’s additionally a threat that auditing of central authorities and NHS spending might be delayed, the committee stated.
Just 12% of native authorities our bodies obtained auditors’ opinions enabling them to publish their accounts by an prolonged deadline in 2021-22.
This compares to 45% of our bodies which printed audited accounts in 2019-20 by the required date.
More than 400 our bodies missed the deadline in 2021-22, pushing the cumulative backlog of unpublished audits for all years to 632.
This suggests there’ll an additional deterioration in publishing audited accounts for 2022-23, with the Government and the Financial Reporting Council (FRC) unable to say when the backlog can be addressed, the committee stated.
Gareth Davies, controller and auditor basic on the National Audit Office, lately instructed the committee that the “ratcheting up” of audit necessities regulated by the FRC in gentle of scandals within the personal sector was a significant contributing issue to the delays.
Government plans to ascertain the Audit, Reporting and Governance Authority (ARGA) as a “system leader” for native authorities audit in a bid to handle delays have stalled.
Intermediate preparations for the FRC taking up a number one position are but to formally start.
Dame Meg Hillier, the committee’s Labour chair, accused the Government of failing to reply to warnings over audit failure supplied by councils which have declared efficient chapter.
She stated: “Our Committee warned in 2021 that the system of local government audit was close to breaking point. Disappointingly, since then the situation has only gotten worse.
“The cases of Croydon, Slough, Thurrock and Woking councils all should serve as flashing red signals for the Government, and our report finds that the rot risks spreading to central government finance and the NHS.”
Dame Meg described the variety of corporations presently registered to hold out native audit, which is fewer than 100, as “worryingly low”.
“The Government must get its hands round this problem as a matter of urgency. It’s local taxpayers and service users who lose out when serious financial issues arise. The lack of timely accounts leaves council taxpayers in the dark,” she added.
The report makes a collection of suggestions largely centered on the Department for Levelling Up, Housing and Communities and the FRC offering clarification on how they may deal with issues within the native audit system.
These embrace offering particulars of plans to mitigate the influence of delays and develop the audit workforce.
The committee has additionally known as for the division to set out its contingency plans ought to the legislative programme not enable for ARGA to be established on this Parliament.
Sir Geoffrey Clifton-Brown, Conservative deputy chair of the committee, stated the audit backlog ought to be taken significantly as Government bailouts following the monetary failure of councils value taxpayers “huge” quantities of cash.
He added: “The cumulative delay of auditing 632 Local Authority 2021/22 accounts is a really serious matter, hindering accountability of £100 billion of local government spending.
“How many more horror stories such as Croydon, Slough, Thurrock, and more recently the shocking case of Woking council are there remaining undetected, which ultimately always have to be bailed out at huge costs to the taxpayer?
“The fragility of the number of qualified people and firms tending to carry out these important audits means that the system will only get worse before it gets better.”
The Department for Levelling Up, Housing and Communities has been approached for remark.