Proposals to reset the local audit system and clear the backlog of accounts could drive up the lending rates offered to the sector, councils have warned.

With almost all local authorities in England two years behind with their audited accounts, auditors are expected to issue a raft of qualified and disclaimed opinions later this year.

It comes after the Government proposed implementing a ‘backstop' date of 30 September for the publication of audited accounts for all outstanding years up to 2022-23.

The MJ understands the backstop was originally going to be later this month but this was pushed back when the local government minister changed from Lee Rowley to Simon Hoare in November.

Chair of the Local Government Association's (LGA) economy and resources board, Peter Marland, said the proposals were the ‘least worse option' for resolving the audit crisis - which has hampered the monitoring of council finances - but it was still a ‘worry that lending rates might be affected'.

He said: ‘Any issues with audit increase the risk and lenders look to cover that risk.

'We're not asking the Government to underwrite any increased lending rates but we do want Government assurances that we haven't got yet.

'Discussions are ongoing.'

Cllr Marland – a former private sector accountant – said he hoped the dire state of audit would not mean the next section 114 notice would be missed.

He suggested councils had become more forthcoming about their difficulties and that the arrival of Oflog as a ‘helpful monitoring tool' meant local government was now ‘one of the most crawled over sectors in Government there is'.

Cllr Marland continued: ‘The LGA and councils are now more aware and likely to speak out in cases of financial difficulty.

‘I'm not overly worried that the next Croydon or Thurrock will be missed because of [issues with] audit.

‘There's safety in numbers [about coming forward for help] now.

'It no longer looks like you're the naughty child in class.'