Local Audit Backlog

Local audit is the bedrock of local accountability and transparency, and of trust and confidence in councils to spend taxpayer money wisely. But 14 years of neglect took the system to breaking point and damaged a key part of our early warning system over local government finances at the time we need it the most. We are determined to rebuild the foundations of local government so that it is fit, legal and decent. The Government have taken swift and decisive action to clear the backlog of unaudited local authority accounts in England and put the local audit system on a more sustainable footing. This has included setting a series of statutory backstop deadlines for the publication of audited accounts. These proposals were enacted via legislation in autumn 2024, and two backstop deadlines have now passed. This failure of the system has resulted in poor value for money and additional costs, with some £49 million of grant committed to support bodies with the cost of building back assurance in 2024-25 and 2025-26. https://www.gov.uk/government/news/overhaul-of-local-audit-will-restore-trust-in-broken-system

This statement updates on the outcomes of the second backstop on 28 February 2025, confirms publication of the non-compliance list on gov.uk, gives details of the support available to bodies affected by the backstop measures, and updates on the Government’s longer-term plans for reform of the local audit system.

Local bodies, unless exempt, were required to publish their audited accounts for financial year 2023-24 by 28 February 2025. Over 92% of bodies have published audited accounts for financial year 2023-24. Just under 50% of bodies published a disclaimed opinion due to the backstop, while 41% published unmodified—clean—opinions. The 13 bodies were exempt from the publication requirements; however, exemptions no longer apply for three of these bodies, and they have now published their audited accounts. Taken together, the publication figures continue to demonstrate a significant improvement in the overall publication of audited accounts, despite the proximity between the two.

I can confirm that the Government have today published a list of bodies that failed to meet the publication requirements at this backstop. The list indicates whether bodies published their draft accounts by 16 January 2025—the latest date on which the 30 working day inspection period could commence for it to conclude by the backstop; whether the audit opinion was delivered by the backstop; the date on which it was delivered; and whether bodies published subsequently audited accounts by 20 May 2025.

All bodies and their auditors included on the list have been contacted, and the Government will continue to engage to ensure that outstanding audited accounts for all outstanding financial years are published as soon as practicable. This includes further engagement with a small number of bodies to better understand their reasons for failing to publish draft accounts sufficiently ahead of February’s backstop and the actions that they are taking to publish audited accounts as soon as practicable to be in a position to comply with future backstops. The release of funds to councils to support bodies with the cost of building back assurance will be contingent on the publication of audited accounts and audit fees being paid.

The deadline for publication of audited accounts for financial year 2024-25 is 27 February 2026. In line with amendments made to the Accounts and Audit Regulations 2015, bodies are required to publish their draft accounts by 30 June 2025. The Government will monitor compliance with this deadline with a view to ensuring improvements to the overall system of compliance and timeliness. The Government continue to consider the appropriate incentives and sanctions for the overhauled local audit system and have already set out that the local audit office, once established, will take on oversight in relation to the quality and timeliness of accounts preparation and publication of audited accounts.

In December 2024, the Government published their ambitious strategy to overhaul the broken local audit system. This strategy set out a clear purpose for local audit and its users, proposals for simplified and proportionate financial reporting, improvements to the market’s capacity and capability, and ways to build strong relationships between local bodies and auditors. The establishment of a new single body, the local audit office, to oversee local audit will radically simplify and streamline the currently fragmented system. The LAO will be proportionate and focused on local audit matters, ensuring efficiency, transparency and value for money. The Government also published in early April a response to their consultation, which included 16 further commitments to reform the system.

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