September's deadline for local audits ‘will not be achievable' unless swift measures are taken to tackle problems, including sanctions for under-performing councils, experts have warned.
Audit giant Grant Thornton has told Parliament's Public Accounts Committee (PAC) that five key issues must be addressed before local government's troubled audit regime can be stabilised.
Permanent secretary at the Department for Levelling Up, Housing and Communities (DLUHC), Sarah Healey, last month warned MPs that 370 opinions for 2021-22 were still outstanding, with some councils not having completed an audit for five years.
Ministers brought forward this year's audit deadline from November to September to try to improve matters.
But, according to Grant Thornton's submission to a PAC inquiry, the sector's audit function remains hindered by a lack of clarity over the role of local audit, the complexity of councils' financial statements, lack of investment in finance teams, finite capacity at audit firms and the lack of sanctions against laggard audited bodies.
Grant Thornton warned: ‘Until these issues are addressed, the September deadline proposed by DHLUC will not be achievable.'
A report by Islington LBC's director of finance, Paul Clarke, said ‘many local authorities currently find themselves in a position of not yet having 2020-21 accounts signed off, let alone 2021-22'.
Mr Clarke added other local authorities in London have received letters from their auditors stating their 2021-22 audits will not begin until after this summer.
DLUHC has imposed a deadline of the end of May for draft unaudited accounts for 2022-23.
Karen Murray, a partner at local government auditor Mazars, warned the increasing complexity of the financial reporting requirements in local government and the reliance on third parties for information needed to support the closedown process would make meeting the deadline challenging.
She added: ‘Local government accounts are increasingly complex and the capacity of council finance teams is stretched, which has contributed to a marked deterioration in the quality of accounts in some places.'
The Local Government Association had wanted the May deadline extended to 30 June ‘as this would make more sense for all concerned, especially as it is unlikely that audit work will commence until then'.
