Gove Fails to Tackle £100 Billion of Unaudited Local Council Accounts

Levelling Up Secretary Michael Gove is failing to sort out the crisis in local government – where up to £100 billion in council accounts in England remain unaudited, MPs have found in a new report.

The Commons Public Accounts Committee is highly critical of the Department for Levelling Up’s inertia to tackle the issue – given it was warned of the problem three years ago. It rejected a solution from Sir Tony Redmond, former president of the Chartered Institute of Public Finance and Accountancy, having commissioned a report from him – the main recommendation of which the department refused to implement.

The report comes after Byline Times revealed last week that the crisis among the 350 councils in England had reached epic proportions.

There is a backlog of 545 unaudited accounts and only 15% of the last financial year’s accounts were audited. Some councils have not been audited for five years and one authority – the now bankrupt London borough of Croydon – for eight.

The unaudited public money involved covers spending on schools, housing, transport, the environment, planning and social care.

The committee found that the Department for Levelling Up came up with its own solution, setting up the Audit, Reporting and Governance Authority (ARGA) and handing over responsibilities for leading local audits to the Financial Reporting Council (FRC).

But setting up the new body requires parliamentary legislation and no date has been set for this.

“Despite the pressing need for leadership within local public audit and recognition of the importance to set up ARGA as soon as possible, ARGA will not be set up until 2024 at the earliest,” the report states. “Neither FRC nor the department could confirm whether the legislation required to establish ARGA would be introduced in the current Parliament.”

If it is not, no change is likely until after the next general election – with the committee warning that the situation is likely to get worse before it gets better.

 The report also reveals that unlike private companies – which can face sanctions if not audited – local councils face no penalty if they do not audit their accounts on time.

“There are no consequences for local government bodies or local auditors failing to deliver audited accounts on time,” the report states. “Audit contracts cannot specify the delivery of opinions by a certain date.

“The risk of significant financial or governance issues being detected too late certainly increases significantly where audits are delayed. With the same pool of auditors working across other sectors, including the NHS, the delays in local audit also risk spreading to other areas of public spending.”

Already two government ministry accounts – the Ministry of Justice and the Department for Digital, Culture, Media and Sport – have been qualified because of missing data from local government.

Conservative MP Sir Geoffrey Clifton-Brown, the committee’s chair, said: “The cumulative delay of auditing 632 local authority 2021-2022 accounts is a really serious matter, hindering accountability of £100 billion of local government spending. 

“How many more horror stories such as Croydon, Slough, Thurrock, and more recently the shocking case of Woking Council are there remaining undetected, which ultimately always have to be bailed-out at huge costs to the taxpayer?

“The fragility of the number of qualified people and firms tending to carry out these important audits means that the system will only get worse before it gets better.”

A spokesperson for the Department for Levelling Up, Housing and Communities, said: “Local audit plays a vital role in ensuring transparency and accountability within local bodies and the timely completion of high-quality audits is essential. We recognise the concerns that have been raised and are working with stakeholders to ensure issues are resolved quickly and sustainably. We will consider the committee’s recommendations and respond in due course.”