New reforms to repair the ‘broken' local audit system will boost
taxpayers' confidence in council spending and streamline
the sector so it's fit-for-purpose, legal and decent.
Today, 16 commitments have been set out to achieve this,
including simplifying financial reporting requirements and
increasing capacity to avoid reliance on a small number of
auditors.
The reforms will be backed by up to £49 million of support to
help councils clear their backlogs and cover the additional cost
of restoring audit assurance. Releasing funds to councils will be
reliant on compliance with statutory backstops and linked to the
publication of audited accounts and audit fees being
paid.
In addition, a further £15m of grant was paid to local bodies in
March 2025 as part of an existing package to help meet the wider
costs of meeting audit requirements and fees.
Minister of State for Local Government and English
Devolution, OBE said:
We inherited a broken local audit system, not fit for purpose,
inefficient, fragmented and with a massive backlog.
Taxpayers' expect and deserve to have confidence in the way their
money is being spent locally. A functioning local audit
system is the bedrock of local transparency and accountability so
we are fixing the foundations of local government as part of our
Plan for Change.
We are working in lock-step with local bodies to clear the
backlog and move towards a simplified streamlined system.
The 16 new measures follow an open
consultation on the local audit strategy, which
attracted hundreds of responses.
The measures build on an existing commitment to set up the Local
Audit Office as an independent and unified body, which will stop
fragmentation in the system by co-ordinating functions spread
across different organisations including the Public Sector Audit
Appointments Ltd, the National Audit Office and the Financial
Reporting Council.
These reforms will be crucial to fixing the foundations and
bringing long-term stability to local government as committed in
the Plan for Change.
Further information:
- Up to £49 million in funding for clearing the local audit
backlog will be paid in two stages during 2025/26, in the
form of a non-ring-fenced grant. Allocations will be based on the
size of bodies' audit fees and the number of modified audit
opinions received. Allocations will be reviewed before the
second stage of payments in 2025/26 to take into account revised
cost estimates.
- Funding of £15 million for 2024/25 was paid on 31 March
to eligible local government bodies towards the rise in audit fee
expenditure. This includes allocations to 537 eligible bodies
allocated as a proportion of Public Sector Audit Appointment fee
scales.
- The full government response to the local audit reform
strategy consultation can be found on Gov.uk here.
- Following the 13 December 2024 backstop, the system has taken
a significant step forward. The vast majority of bodies
(approximately 95%) published audited accounts for all years up
to and including financial year 2022/23.
- While the government has been clear the broken system
requires fundamental long-term fixes that cannot happen
overnight, decisive and immediate action has already begun. In
July, we announced a series of backstop dates to clear the
backlog of hundreds of missing and overdue accounts which
resulted in 95% of audited accounts being published.
