The government has announced that it will “clearly set out” the purposes of local audit to ensure the long-term stability of the sector but has offered no update on the new system leader.
In November 2023, the Levelling Up, Housing and Communities (LUHC) Committee published its findings report for its inquiry into the ‘crisis in local audit’, which stated that the government must act “urgently” to clear the local authority audit backlog. It recommended that once the backlog is cleared the government should take long-term action to prevent this crisis from happening again.
The LUHC committee’s report outlined five purposes of local authority accounts that it believed should underpin all attempts to change and improve accounts. It recommended that the government make “some specific and straightforward changes” to accounts that would align them with the five purposes.
In the government’s response to the report (published 5 January), it was stated that the committee’s five purposes are a “helpful starting point”, which will inform system partners’ work on long-term audit reform.
The government also agreed that there is “merit” in the committee’s recommendation for the Department for Levelling Up, Housing and Communities (DLUHC) to issue a policy statement “clearly setting these purposes out”.
ARGA implementation
Another key recommendation from the LUHC was that DLUHC take steps to create the Audit Reporting and Governance Authority (ARGA) as the “system leader” to help ensure the long-term stability of local audit.
The government confirmed ARGA as the new regulator for local audit in May 2022.
However, in response to the LUHC committee’s recommendation on ARGA, the government gave no update on when the system leader is expected to be implemented.
Instead, the response stated that ARGA “will be established through primary legislation when parliamentary time allows”.
The government wrote that its “immediate priority” is clearing the current backlog, with a consultation on its proposals to do so expected in early February. These proposals include a compulsory backstop deadline of 30 September for all outstanding local authority audited accounts in England.
“Clearing the backlog is a key priority, but we recognise the need to ensure that the system is on a more sustainable footing for the long term,” the government said.
Permanent backstop dates
Another recommendation made in the LUHC’s report was for the government to introduce backstop dates for publishing audited local authority accounts on an annual basis going forward to prevent the audit crisis from happening again.
In response, the government stated that alongside the backstop date to address the current backlog, it would “consider the desirability of backstop dates becoming a permanent feature of the local audit process”.
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