Local audit backlog undermines council financial data in England

Members of Parliament (MPs) are raising concerns about delays in local audits that affect public sector finances. The Public Accounts Committee has urged the government to act quickly to address these issues. A recent report reveals that unreliable financial information has led to significant overstatements in government income and debt. It shows that the National Audit Office could not sign off on government accounts for 2022-23 because only 10% of local authorities in England submitted trustworthy data. This makes it difficult for the government to monitor the financial health of councils, especially as they face increasing demands and potential bankruptcy. The report estimates that faulty data has resulted in an overstatement of net income by about £34.4 billion and net debt by £31.7 billion. The committee pointed out that the Ministry of Housing, Communities and Local Government (MHCLG) struggles to effectively track local government finances as a result. The government claims it is aware of the situation in local councils and has other methods to assess their financial health. However, the committee emphasized delays, highlighting the case of Barnet Council, which had significant financial issues but did not notify the government until years later. The committee has requested that the government outline a plan within six months to reduce missing financial data. While the government has set deadlines for completing council accounts and plans to establish a local audit office, there are concerns about the enforcement of these deadlines and the capacity of audit firms to meet demand. Sir Geoffrey Clifton-Brown, chair of the committee, expressed the need for reliable financial data to ensure transparency for taxpayers. He noted that the current situation creates uncertainty for decision-making in the UK, especially with the challenges posed by climate change and geopolitical tensions. Overall, the report underscores the importance of updating and improving financial oversight for public sector accounts in the UK. The government has been contacted for further comment on these matters.