The official audit watchdog has refused to sign off the Government’s spending figures for the first time due to inadequate scrutiny of local authorities’ finances.
Severe backlogs in the auditing of England’s 426 councils have prompted the National Audit Office (NAO) to “disclaim” the figures, saying it is impossible to assess data and provide assurance on the Whole of Government Accounts (WGA).
The NAO said just one in 10 local authorities submitted adequate formal accounts in 2022-23, with half of the remaining councils failing to provide any financial data on spending and the rest submitting accounts that had not been audited.
The WGA brings together the accounts of more than 10,000 public bodies, including central government departments, devolved administrations, the NHS, academy schools and public corporations.
In his report, NAO head Gareth Davies said he had been “unable to obtain sufficient, appropriate evidence upon which to form an opinion”.
He added: “It is clearly not acceptable that delays in audited accounts for English local authorities have made it impossible for me to provide assurance on the Whole of Government Accounts for 2022-23.
“It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective.”
The WGA is considered a vital tool for the management and scrutiny of public spending, while the effective auditing of councils’ accounts can highlight potential problems and prevent financial failure.
The NAO said the Government is taking steps to deal with the audit backlog in local government, including a fixed deadline for when annual audits must be completed.
“This process is unlikely to allow the disclaimer on WGA to be removed for 2023-24 but it does offer a medium-term solution to the problem,” the NAO added.
Sir Geoffrey Clifton-Brown, Conservative chairman of the Public Accounts Committee, said: “It is deeply unsatisfactory that failures in the local authority audit market have meant that the Comptroller and Auditor General is unable to give any formal audit opinion on the accounts for the first time ever.
“If these issues are not addressed, it will become increasingly difficult to hold local leaders to account and more horror stories of failing councils will follow.
“The Government should press forward with its plans to permanently resolve the local audit crisis. The Whole of Government Accounts must be made fit for purpose again.”
A Treasury spokesperson said: “The Whole of Government Accounts remain a valuable and reliable source of information for a wide range of stakeholders.
“We are working with local authorities to improve reporting and transparency and ensure the accounts are as detailed as possible, while making significant additional disclosures to the National Audit Office to address any missing data.”
A spokesperson for the Local Government Association said: “It has been clear for a long time that local audit is in crisis and the need to come to a pragmatic solution to the local audit backlog is urgent.
“We are pleased that the Government has committed to overhauling local audit in the longer term.
“There is an urgent need to restore confidence in the local audit arrangements, restore timely audits permanently, and improve financial reporting.
“This needs to be progressed, with strong involvement from the local government sector, and proposals should not lead to reputational damage for councils as a result of a problem that is not of their making.
“The local audit crisis will continue to impact on whole government accounts for the foreseeable future.
“Consideration should also be given to whether the value of including local authorities in WGA is outweighed by the problems it causes, and that there may be value in excluding local authority figures in their entirety for a period.
“This is also likely to free up resources that could be redirected to help address the local audit crisis.”
