Municipality audit close to 'breaking point'

The Public Accounts Committee has said the government’s oversight of local government audit is becoming ‘increasingly complacent’.

Less than half of local authority audits met the deadline for completion in 2021-20, and half of audits examined by the Financial Reporting Council were deemed to be needing ‘a lot more than limited’ improvement. MPs reason that the neighborhood audit market is ‘now entirely reliant upon only eight firms, two of that are responsible for up to 70 per cent of local authority audits’.

If local authorities will be to effectively recover from the pandemic, the committee states that it is critical that citizens possess the necessary assurances that their money is in order and being managed in the correct manner.

The committee questions whether the ‘pressing’ need for new system leadership in local public audit, identified in last year’s Redmond Review, is met by government’s proposal for any future Auditing, Reporting and Governance Authority (ARGA) which will not be setup until 2023 in the earliest. It’s unclear whether or not this will then have the ability to fully address the present failings in the market for auditing local authorities, as well as in the meantime MHCLG hasn't given enough ‘credible detail on addressing the urgent problems that cannot watch for ARGA’.

Meg Hillier, chair from the Public Accounts Committee, said: “Our citizens expect public authorities to account for the taxpayers’ money they spend. As public spending and demand on local services have exploded using the pandemic, the accelerating decline in the timeliness and quality of audit of local government spending undermines that accountability, and undermines effective spending decisions.

“Even before Covid the neighborhood government audit market was strained. If the market cannot deliver that accountability and clarity about the costs and risks in municipality the federal government ought to be more concerned than its slowness to do something suggests. The Redmond Review of municipality audit is really a thorough and sensible piece of work but some of their measures won’t be implemented until 2023 – a lot more than four years because it was commissioned. And public audit is added being an afterthought to a body which oversees the different field of company auditing.

“Once we embark on the long road to recovery from Covid-19 and transition to a net zero carbon economy, clear, accessible and transparent audit reports will be more important not less. The delays in delivering audits are the tip of the iceberg of issues facing public audit which need real resolve for resolve.”