Overhaul of local audit will restore trust in broken system
Source: gov.uk (2025-04-09)

Road to recovery outlined in new commitments for local audit reform to streamline and fix the fragmented and broken system.

- Road to recovery outlined in new commitments for local audit reform to streamline and fix the fragmented and broken system
- Reform will ensure local authorities get their books in order to restore transparency, provide better value for taxpayers and create effective public early warning system
- And up to £49 million in funding announced to support local authorities in clearing the backlog as part of the Plan for Change
New reforms to repair the ‘broken’ local audit system will boost taxpayers’ confidence in council spending and streamline the sector so it’s fit-for-purpose, legal and decent.

Today, 16 commitments have been set out to achieve this, including simplifying financial reporting requirements and increasing capacity to avoid reliance on a small number of auditors.

The reforms will be backed by up to £49 million of support to help councils clear their backlogs and cover the additional cost of restoring audit assurance. Releasing funds to councils will be reliant on compliance with statutory backstops and linked to the publication of audited accounts and audit fees being paid.

In addition, a further £15m of grant was paid to local bodies in March 2025 as part of an existing package to help meet the wider costs of meeting audit requirements and fees.

Minister of State for Local Government and English Devolution, Jim McMahon OBE said:

We inherited a broken local audit system, not fit for purpose, inefficient, fragmented and with a massive backlog.

Taxpayers’ expect and deserve to have confidence in the way their money is being spent locally. A functioning local audit system is the bedrock of local transparency and accountability so we are fixing the foundations of local government as part of our Plan for Change.

We are working in lock-step with local bodies to clear the backlog and move towards a simplified streamlined system.

The 16 new measures follow an open consultation (https://www.gov.uk/government/consultations/local-audit-reform-a-strategy-for-overhauling-the-local-audit-system-in-england/local-audit-reform-a-strategy-for-overhauling-the-local-audit-system-in-england) on the local audit strategy, which attracted hundreds of responses.

The measures build on an existing commitment to set up the Local Audit Office as an independent and unified body, which will stop fragmentation in the system by co-ordinating functions spread across different organisations including the Public Sector Audit Appointments Ltd, the National Audit Office and the Financial Reporting Council.

These reforms will be crucial to fixing the foundations and bringing long-term stability to local government as committed in the Plan for Change.

Further information:
- Up to £49 million in funding for clearing the local audit backlog will be paid in two stages during 2025/26, in the form of a non-ring-fenced grant. Allocations will be based on the size of bodies’ audit fees and the number of modified audit opinions received. Allocations will be reviewed before the second stage of payments in 2025/26 to take into account revised cost estimates.
- Funding of £15 million for 2024/25 was paid on 31 March to eligible local government bodies towards the rise in audit fee expenditure. This includes allocations to 537 eligible bodies allocated as a proportion of Public Sector Audit Appointment fee scales.
- The full government response to the local audit reform strategy consultation can be found on Gov.uk here (https://www.gov.uk/government/consultations/local-audit-reform-a-strategy-for-overhauling-the-local-audit-system-in-england).
- Following the 13 December 2024 backstop, the system has taken a significant step forward. The vast majority of bodies (approximately 95%) published audited accounts for all years up to and including financial year 2022/23.
- While the government has been clear the broken system requires fundamental long-term fixes that cannot happen overnight, decisive and immediate action has already begun. In July, we announced a series of backstop dates to clear the backlog of hundreds of missing and overdue accounts which resulted in 95% of audited accounts being published.