The National Audit Office (NAO) today reports that local auditors gave opinions on only 12% of local government bodies’ 2021-22 financial statements by the statutory accounts’ publication deadline of 30 November 2022. This compares to 9% of opinions for the previous year (2020-21) received by the earlier deadline of 30 September 2021. This remains a significant reduction compared with the 45% of opinions given in 2019-20 and 97% in 2015-16. As of 30 November 2022, Public Sector Audit Appointments Ltd (PSAA) reported a total of 632 audit opinions were outstanding for all years.1

The NAO report: ‘Timeliness of local auditor reporting on local government in England’ examines the progress made in improving the timeliness of auditor reporting on English local public bodies’ financial statements. It is a follow-up report to our March 2021 publication examining audit timeliness in 2019-2020.2 Delays in completing audited accounts can have significant implications for local accountability and the effective management of public money. Local public bodies deliver many services to residents, businesses and taxpayers and account for a significant amount of public spending. High quality local auditing is essential for public trust in how taxpayers’ money is spent. 

Since 2015-16 there has been a reduction in the number of local government audit opinions delivered on time, with significant reductions from 2018-19 onwards. A downward trend accelerated during the COVID-19 pandemic. A 2021 report from The Public Accounts Committee (PAC) highlighted that DLUHC’s oversight of local government finance was being hampered by “shockingly late” audit opinions.3

Delays to local government audit opinions continue to have impacts elsewhere in the public audit system. For the financial year 2019-20, local audit delays were one of several factors affecting the Whole of Government Accounts, which were certified 26 months after the year end and five months later than the statutory deadline. Delays in local auditor assurance over pension liabilities, contributed to 2021-22 accounts for affected central government departments and their arm’s length bodies being published months after the Parliamentary summer recess.

A variety of complex factors are contributing to audit delays. There is a lack of qualified and experienced staff in both local authority finance teams and firms serving the local audit sector. Audit staff have more attractive opportunities compared to local audit, contributing to high turnover. Council activities have become more complex and commercial in nature, and a greater focus on audit quality risks has further increased work in some areas.

DLUHC has set out a range of approaches to increase auditor supply, though some are only expected to begin later in 2023. The approaches include creating new routes for becoming a key audit partner (a defined role in the local audit regime) and developing a new qualification for local auditors. DLUHC is also aiming to launch a new technical advisory service to support firms with specialist advice on complex local audit issues.

Public Sector Audit Appointments Ltd (PSAA)4 also sought to increase the commercial attractiveness of audit and encourage new audit suppliers through its recent auditor appointment process. The procurement has secured sufficient capacity to appoint auditors to all local authorities for the five years from 2023-24, albeit at significantly increased cost: PSAA expects costs for authorities to rise on average by 150%. Central Government had earlier pledged an additional £15 million to help meet additional costs arising from the recommendations made by the Redmond Review, and a further £45 million in funding to local government bodies over three years from 2022-23 to support increased financial reporting and audit costs.

The Audit, Reporting and Governance Authority (ARGA), which government expects will replace the Financial Reporting Council (FRC) in 2024 at the earliest, will become the new system leader for local audit. Until then, DLUHC will continue as acting system leader. The FRC has begun preparing for a shadow system leadership role which it expects to be formalised in early 2023.

“Local government audit provides transparency and accountability to both taxpayers and locally elected representatives. It also provides assurance that local authorities’ financial management is strong enough and delivering value for money.

“The Department for Levelling Up, Housing and Communities must continue working with the FRC and other key stakeholders to secure the timely production of audited accounts for local authorities. It is essential to transparency that the timeliness of local auditor reporting improves and does so quickly.”

Gareth Davies, the head of the NAO

Read the full report

Progress update: Timeliness of local auditor reporting on local government in England

Notes for editors

Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.

  1. The organisations which play a part in the system of local audit: The National Audit Office, Public Sector Audit Appointments Ltd, the Financial Reporting Council, the Institute of Chartered Accountants in England and Wales, local authorities and local auditors.
  2. The NAO reports – Local authority governanceand Local auditor reporting in England 2018, both published January 2019. Timeliness of local auditor reporting on local government in England, 2020 published in March 2021.
  3. The Accounts and Audit Regulations 2015 set out the publication requirements for financial statements by specifying a date by which a local government body should publish its accounts. While there is no explicit statutory deadline by which auditors must give their opinion on the financial statements, there is a clear expectation that local government bodies should publish accounts including the auditor’s opinion by the statutory publication date. Wherever possible, the auditor therefore needs to provide their opinion in time to enable the authority to include it in its published financial statements.
  4. Public Sector Audit Appointments Ltd, (PSAA) appoints auditors to local government bodies which have opted into its national scheme. Figures reported by PSAA only cover bodies opted into its national scheme. All but nine local government bodies were opted in for 2021-22. Its most recent procurement took place in 2022, appointing auditors for the five financial years from 2023-24 to 2027-28.

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