Financial Reporting and Audit in Local Authorities

Housing, Communities and Local Government Committee Closed Inquiry
Opened: 3 Mar 2023 Closed: 18 Mar 2024 Parliament page
This inquiry will examine a range of issues relating to the purpose, understanding and impact of financial reporting and audit in local authorities. It will scrutinise the role of audit in local accountability and democracy and the extent to which accounts provide a clear picture of the financial sustainability and … Read more
15 Recommendations
16 Conclusions
1 Report
4 Oral sessions
5 Letters
4 Events
Activity timeline 15 events
23 Apr
2024
Correspondence
5 Feb
2024
Report published
17 Jan
2024
Correspondence
5 Dec
2023
Correspondence
24 Nov
2023
Report published
18 Jul
2023
Correspondence
17 Jul
2023
Oral evidence
17 Jul
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
26 Jun
2023
Oral evidence
26 Jun
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
5 Jun
2023
Oral evidence
5 Jun
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
Oral evidence sessions 4 sessions
17 Jul 2023
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Oral Evidence
Lee Rowley · Department for Levelling Up, Housing and Communities Siobhan Jones · Department for Levelling Up, Housing and Communities
26 Jun 2023
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Oral Evidence
Alison Scott · Three Rivers District Council Councillor Abi Brown · Local Government Association Councillor Richard Wenham · Central Bedfordshire Council Councillor Tudor Evans · Plymouth City Council Gerald Almeroth · Westminster City Council Michael Hudson · Cambridgeshire County Council
5 Jun 2023
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Oral Evidence
Conrad Hall · Newham Council Gareth Davies · National Audit Office Iain Wright · ICAEW Lynn Pamment · Financial Reporting Advisory Board Mike Newbury · National Audit Office Rob Whiteman · CIPFA
15 May 2023
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Oral Evidence
Dr Henry Midgley · Durham University Ed Hammond · Centre for Governance and Scrutiny Neil Harris · Financial Reporting Council Professor David Heald · University of Glasgow Sarah Rapson · Financial Reporting Council Sir Tony Redmond · Chartered Institute of Public Finance and Accountancy (CIPFA)
Title HC No. Published Items Response
First Report - Financial Reporting and Audit in Local Authorities HC 59 24 Nov 2023 31 Responded
Recommendations & Conclusions
14 results
Clear
1 Conclusion Deferred
First Report - Financial Reporting…
Local authority accounts inadequately support democracy due to stakeholder access and understanding issues
The publication of local authority accounts and local authority audit have a vital role to play in supporting local democracy and accountability. However, their capability to fulfil this vital role is limited because stakeholders who might want to use the … Read more
Government Response
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and finds the committee's proposals a helpful starting point. It accepts the merit of issuing a policy statement but defers this until after clearing the audit backlog and alignment with CIPFA's Accounting Code, committing to provide an update by the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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2 Conclusion Deferred
First Report - Financial Reporting…
Lack of shared purpose for local authority accounts hinders democratic accountability
There is currently no shared view of the purposes of local authority accounts and who should be using them. This has made it difficult to decide what the format and contents of the accounts, and their accompanying audit outputs, should … Read more
Government Response
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and finds the committee's proposals a helpful starting point. It accepts the merit of issuing a policy statement but defers this until after clearing the audit backlog and alignment with CIPFA's Accounting Code, committing to provide an update by the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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3 Conclusion Deferred
First Report - Financial Reporting…
First purpose of local authority accounts is to provide a credible public financial record
We believe that the first purpose of local authority accounts is: To provide a credible public financial record that can be relied upon, and which can be used as a point of comparison for other financial information to assess its … Read more
Government Response
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and considers the committee's proposed purpose a helpful starting point. It defers issuing a policy statement and formal adoption into the Accounting Code until after clearing the audit backlog and aligning with CIPFA and FRC, providing an update by the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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4 Conclusion Deferred
First Report - Financial Reporting…
Second purpose: enable stakeholders to understand resource use and hold authorities accountable
We believe that the second purpose of local authority accounts is: To enable council taxpayers, businesses, central government, and other sources of funding to understand what money the local authority has received (including council tax, government grants and borrowing) and … Read more
Government Response
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and considers the committee's proposed purpose a helpful starting point. It defers issuing a policy statement and formal adoption into the Accounting Code until after clearing the audit backlog and aligning with CIPFA and FRC, providing an update by the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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5 Conclusion Deferred
First Report - Financial Reporting…
Third purpose: enable residents and councillors to scrutinise value for money in services
We believe that the third purpose of local authority accounts is: To enable residents, service users, and councillors to understand the value for money offered by the authority’s spending, so that they can scrutinise the economy, efficiency, effectiveness, and equity … Read more
Government Response
The government agrees it would be beneficial to clearly set out the purposes of local authority accounts and considers the committee's proposed purpose a helpful starting point. It defers issuing a policy statement and formal adoption into the Accounting Code until after clearing the audit backlog and aligning with CIPFA and FRC, providing an update by the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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6 Conclusion Deferred
First Report - Financial Reporting…
Fourth purpose: enable councillors and officers to understand financial activity for informed decisions
We believe that the fourth purpose of local authority accounts is: To enable councillors and officers inside the authority to understand the financial activity, financial position, financial sustainability, and resilience of the authority, so that they can make informed decisions … Read more
Government Response
The government agrees to clearly set out the purposes of local authority accounts in a single place, using the Committee's proposals as a starting point. They will work with CIPFA and FRC to align the Accounting Code and issue a policy statement, with an update provided ahead of the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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7 Conclusion Deferred
First Report - Financial Reporting…
Local authority accounts must enable informed decisions on financial issues.
We believe that the fifth purpose of local authority accounts is: To enable the public, oversight bodies and central government to understand the financial situation and any actual or potential financial issues affecting the authority, so that they can make … Read more
Government Response
The government agrees to clearly set out the purposes of local authority accounts in a single place, using the Committee's proposals as a starting point. They will work with CIPFA and FRC to align the Accounting Code and issue a policy statement, with an update provided ahead of the 2025-26 financial year.
Ministry of Housing, Communities and Local Government
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8 Recommendation Deferred
First Report - Financial Reporting…
Ensure local authority account purposes are clearly set out and accessible to stakeholders.
The Government must ensure that the purposes of local authority accounts are clearly set out in government policy and accessible to all relevant stakeholders. This should be done before the next accounts production cycle for the year ended 31 March … Read more
Government Response
The government agrees there is merit in issuing a policy statement to clearly set out the purposes of local authority accounts. However, this will be done as part of a longer process with CIPFA and FRC, with an update provided ahead of the 2025-26 financial year, missing the recommended 31 March 2024 deadline.
Ministry of Housing, Communities and Local Government
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15 Recommendation Deferred
First Report - Financial Reporting…
Quickly implement proposed actions to clear audit backlog and provide regular progress updates.
The Department must move quickly to clear the audit backlog and implement its proposed actions by the end of the calendar year 2023. Until the actions have been fully implemented, the Department should provide us with updates on its progress … Read more
Government Response
The government is working to clear the backlog with a consultation beginning in February, but does not commit to the 2023 deadline. It will provide updates at key junctures, and while auditors already provide reasons for modified opinions, the government is considering how to ensure consistent messaging regarding fault and will keep the recommendation for specific fault identification under review.
Ministry of Housing, Communities and Local Government
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22 Conclusion Deferred
First Report - Financial Reporting…
Statutory overrides, namely requirements introduced by legislation that override standard accounting practice, are not aligned...
Statutory overrides, namely requirements introduced by legislation that override standard accounting practice, are not aligned with the intended purposes of local authority accounts. Some statutory overrides can be beneficial by reducing the complexity of the accounts, but many add new … Read more
Government Response
The government recognises that statutory overrides can add complexity to accounts and commits to reviewing existing overrides and relevant legislation to ensure their value outweighs complexity. However, this review will be deferred until after the audit backlog is cleared.
Ministry of Housing, Communities and Local Government
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23 Recommendation Deferred
First Report - Financial Reporting…
The Department for Levelling Up, Housing and Communities must immediately initiate a review into existing...
The Department for Levelling Up, Housing and Communities must immediately initiate a review into existing legislation that places requirements on the contents and format of local authority accounts. The review should refer to the intended purposes and users of the … Read more
Government Response
The government commits to reviewing existing legislation on local authority accounts to reduce complexity and ensure usefulness, but states this will not be an immediate priority due to the audit backlog and will instead form part of long-term reform work.
Ministry of Housing, Communities and Local Government
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25 Conclusion Deferred
First Report - Financial Reporting…
The Government previously accepted the Redmond Review’s recommendations to introduce a standardised statement of service...
The Government previously accepted the Redmond Review’s recommendations to introduce a standardised statement of service information and costs for local authority accounts. Implementing these recommendations would constitute an important step to improving the clarity and content of local authority accounts. … Read more
Government Response
The government remains committed to introducing a standardised statement but explains that implementation is delayed until the audit backlog is cleared to avoid additional burdens on auditors, while CIPFA develops interim performance reporting.
Ministry of Housing, Communities and Local Government
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26 Recommendation Deferred
First Report - Financial Reporting…
The Department, in consultation with the Chartered Institute of Public Finance and Accountancy, must resume...
The Department, in consultation with the Chartered Institute of Public Finance and Accountancy, must resume the introduction of a standardised statement of service information and costs for local authority accounts as soon as actions to address the audit backlog have … Read more
Government Response
The government remains committed to a standardised statement but defers its introduction until the audit backlog is cleared, citing concerns about adding new requirements at this time. CIPFA will first focus on developing better performance reporting, which could be a precursor to the statement.
Ministry of Housing, Communities and Local Government
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27 Recommendation Deferred
First Report - Financial Reporting…
Introduce legislation to decouple local authority accounts from Pension Fund statements
Local authority accounts are currently required by legislation to include Pension Fund statements, but this has made the accounts longer, more complicated, and less useful to users. The Government should introduce legislation to decouple local authority accounts from these Pension … Read more
Government Response
The government commits to considering the recommendation to decouple local authority accounts from pension fund statements as part of a broader review of legislation it has already committed to undertake.
Ministry of Housing, Communities and Local Government
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Government Response AI assessment · 31 of 15 classified
Accepted 2
Accepted in Part 4
Acknowledged 5
Deferred 14
Rejected 6
Total 15 recs + 16 conclusions
Correspondence 5 letters
23 Apr 2024 To committee Letter from the Minister for Local Government to the Chair dated 17 April 2024 concerning the Government’s response to the Committee’s report on Financial Reporting and Audit in Local Authorities
Parliament page
17 Jan 2024 To committee Letter from Minister for Local Government to Chair relating to the financial reporting and audit in local authorities, dated 9 January 2024
Parliament page
5 Dec 2023 To committee Letter from the Chair to the Local Government Association dated 27 November 2023 concerning changes to local government financing
Parliament page
18 Jul 2023 To committee Letter from the Parliamentary Under Secretary of State for Local Government and Building Safety to the Chair dated 14 July 2023 concerning local government audits
Parliament page
25 Apr 2023 To committee Letter from the Mayor of Croydon to the Chair dated 30 March 2023 concerning accountability in local government
Parliament page