Save content
Have you found this content useful? Use the button above to save it to your profile.
Only 12% of local government audits hit their deadline for 2021-22
iStock_Laures_Snail race

Local government audits lag in regulatory vacuum

by

Even with extended deadlines, only 60 local authorities managed to get their 2021/22 accounts audited by the end of November. 

4th Jan 2023
Save content
Have you found this content useful? Use the button above to save it to your profile.

In a continuing regulatory vacuum, the “alarming” backlog of local government audits is beginning to seriously undermine local government finances. 

Figures for the 2021/22 financial year released in December by Public Sector Audit Appointments (PSAA), the interim body responsible for assigning and overseeing this work, show that only 12% of audits were completed by the 30 November deadline.

The figure is an improvement on the 9% achieved in 2021, but the PSAA pointed out that last year’s deadline was two months later than the 30 September target set in 2021.

“What makes the latest position increasingly alarming is that more than 220 opinions from prior years remain outstanding… this means that a total of more than 630 opinions are currently late,” the PSAA said.

Steve Freer, who chairs the PSAA, commented: “The scale of the backlog of outstanding opinions is such that it is beginning to seriously undermine the financial management, governance and accountability of local government bodies. As 2023 approaches, more than 160 bodies are still awaiting audit opinions for both 2020/21 and 2021/22 and for some even earlier years. 

“As a result they are making decisions, managing multiple financial challenges and laying plans for the future with limited assurance about their underlying financial positions. The local audit system desperately needs to find a way of clearing the backlog and restoring the norm of timely opinions as quickly as possible.”

A chronic problem

Although the figures nose-dived from 45% completed on time in 2019/20, the local government audit backlog has been a persistent concern for longer than that, with Reading Council struggling to get its books vetted on time all the way back to 2016/17.

The problem has been brewing since the Audit Commission was mothballed in 2015 and responsibility was passed to the PSAA, which was founded and funded by the Local Government Association. The work is time-consuming and not as profitable as commercial audits, so many larger firms with the capability to do local government audits can’t be bothered to take them on.

A £250,000 regulatory fine for Mazars in January this year for a local government audit that suffered from “insufficient and undocumented challenge” of refurbishment costs in the valuation of the authority’s housing estate won’t have helped.

According to the Chartered Institute of Public Finance and Accountancy’s director of public financial management Iain Murray, local audit regulation is in a transition phase and underlying issues with asset valuations are covered by a statutory override until 2025.

Waiting for ARGA

By that date, local audit regulation should be the preserve of the long-awaited Audit, Reporting and Governance Authority (ARGA), which was originally intended to come on stream in April 2023.

But the ARGA Bill was dropped from the Queen’s speech in April due to a lack of available parliamentary time. The Financial Reporting Council (FRC) pushed its planning assumption for the transition back a year and added local audit oversight to its draft three-year plan for 2023–26. The regulator appointed former EY partner and Audit Commission district auditor Neil Harris as its first director of local audit last October and has earmarked £2.2m to fund his work over the next year.

How that commitment is going to address the issues affecting audits of £100bn+ in local government spending remains to be seen.

Tags:

Replies (2)

Please login or register to join the discussion.

avatar
By abdool hamid zainoul warishaully
07th Jan 2023 13:42

audit is a license 2 prnt money 4 waste., like a dog barking @ the trains passing ny.

Thanks (0)
Ellen Litwack tutor
By buddyhelp
23rd Feb 2023 13:40

This is a thought-provoking article that sheds light on the challenges faced by local government audits due to a lack of regulatory oversight. The article highlights the potential risks and consequences of this regulatory vacuum, particularly in the areas of financial reporting and accountability. It's concerning to see that some local government bodies are falling behind in their audits and potentially putting public funds at risk. I appreciate the in-depth analysis and insights provided in this article, and I hope that it will lead to greater awareness and action on this issue. Thanks

Thanks (0)