Written statement on Local Audit Build-back Progress - Dec 2

Minister for Local Government and Homelessness (Alison McGovern): Since this Government came to power last year, it has worked tirelessly to fix the broken local audit system in England, so people can trust that their council tax is being spent well. To ensure continued progress and that the Government's wider programme of systemic reform is set up for success, we must speed up the process of rebuilding assurance at local bodies.

Clearing the backlog

The local audit backstop programme – comprising a series of six statutory publication deadlines for audited accounts – has continued to deliver against its statutory milestones. While the reset has meant many disclaimed audit opinions – as the Government made clear that it would last July – it has cleared the local audit backlog and made significant progress on restoring the discipline needed for timely publication of both unaudited and audited accounts.

After two backstops, there has been a significant improvement in the publication of audit opinions. As of 31 August 2025, 99% of local bodies had received and published audit opinions for all years up to 2022/23, and 94% had published audit opinions for 2023/24. An updated non-compliance list for the latest backstop has been published today.

There has also been an improvement in the prerequisite publication of draft unaudited accounts. By 16 January 2025, just under 95% of bodies had published unaudited accounts ahead of the second backstop on 28 February 2025. Ahead of the 27 February 2026 backstop, 98% of bodies had already published their 2024/25 draft accounts as of 5 November 2025.

The advances that local bodies and audit firms alike have made in complying with the backstop programme have put the system in a much more secure and stable position. In turn, this will better enable the rebuilding of assurance and the implementation of wider reforms.

Progress on rebuilding assurance

Given the large number of disclaimed opinions, the backstops were announced alongside a five-year programme for building back assurance, with an aspiration that local audit recovers as soon as possible within that period.

Due to the scale of the local audit backlog and the limited capacity of audit firms and local bodies, the process of rebuilding assurance at local bodies was always going to be highly challenging. The process is technically difficult, resource-intensive and time-consuming, and the fundamental challenges facing the local audit system set out in the Government's 2024 strategy remain a significant barrier to progress for some bodies. Both auditors and local bodies continue to navigate disproportionately complex financial reporting and audit requirements.

Our ambition is for local audit to recover assurance as early as possible, and we will continue to work with local bodies and audit firms to achieve this aim. However, despite significant efforts by all parties involved, progress has been slower than anticipated. It is now clear that the more immediate aspiration for the majority of disclaimed opinions driven by backstop dates to be limited to the first two years of this period (up to and including the 2024/25 backstop date of 27 February 2026) will not be realised. This will mean many local bodies continuing to receive disclaimed opinions for 2025/26 and 2026/27.

Evidently, it remains in the public interest that disclaimed opinions are cleared as quickly as possible. Effective local audit ensures transparency and accountability for public money spent on vital services. I am committed to working with all those in the system to do everything in our power to get back on track and ensure that assurance is rebuilt within the five-year period.

Measures to help

Today the Government has written to all audit firms and to all local bodies in the process of rebuilding assurance, underlining the need for everyone to work together to do everything possible to accelerate progress – and encouraging them to prioritise resources accordingly. I have asked them to work together to provide information to my Department on progress at individual bodies, including where there seem to be systemic issues with capacity, governance or financial management preventing assurance being rebuilt. I have also requested that audit firms escalate serious issues to local bodies promptly – ensuring that my Department is also aware – and to issue statutory recommendations or public interest reports where appropriate. This will enable the Department to undertake its responsibilities in relation to overall accountability and stewardship and provide additional support and guidance most effectively.

In order to ensure that recovery can be completed within the overall five-year timeline, my Department will continue to assist affected local bodies, with additional training and support events led by the Chartered Institute of Public Finance and Accountancy planned for next year. Rapid work is also underway to develop a new approach to audit quality oversight tailored specifically to audits focussed on the rebuilding of assurance.

The Government is also considering what further measures may be necessary to support both auditors and local bodies in accelerating progress, in line with the Government's ambition of the system clearing all backstop-related disclaimed opinions by the end of 2027/28.

Ongoing reforms

The challenges encountered serve to further underscore the vital importance of the Government's wider reforms, for which there remains strong and widespread support. The private sector has committed to working with us to rebuild the system, and its confidence in the reforms is demonstrable. All audit firms with existing local audit contracts have agreed with Public Sector Audit Appointments Ltd to extend their current contracts for a further two years, until the end of 2029/30.

Recognising the urgency of change, new secondary legislation is now in force to raise local audit regime thresholds. This will help to free up auditor capacity by enabling audit firms to work in a more proportionate way.

The English Devolution and Community Empowerment Bill, which contains key elements of our reform programme, is progressing through Parliament. The Bill includes measures to create the Local Audit Office, which will provide vital oversight and streamline the system. The Government's intention is for the Local Audit Office to be established in autumn 2026. It will take responsibility for statutory functions in relation to regulatory oversight and standards from day one, subsequently increasing to its full range of duties as it builds capacity and staff transfer from existing organisations. The Local Audit Office will take responsibility for the backstop programme and oversight of the process of rebuilding assurance at local bodies from April 2027. My Department has today published a transition plan, setting out detail on the timeline for implementing the new local audit system and how the transition will be managed.

Timeliness of assurance through audit is underpinned by the need for high-quality accounts and financial reports. As such, we are also working with the Chartered Institute of Public Finance and Accountancy and the Devolved Governments to address underlying issues and prioritise solutions to simplify financial reporting.

We will restore the local audit system back to health and rebuild confidence in local finances.