Data shows a majority of councils missed accounts deadline as reserves fall
Two-thirds of councils had not published details of spending by the date set by the Government as concerns are raised over audits and transparency.
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Your support makes all the difference.Less than a third of councils published draft accounts by this year’s deadline amid concerns over town hall finances and audit delays undermining local democracy.
Research shared with PA news agency shows 94 of 314 local authorities in England released accounts for 2022/23 by the required date of May 31, with a further 5% publishing by June 2.
Of the 205 councils that had not published, 112 issued delayed publication notices, according to data provided by LG Improve.
The most common reason cited was a problem with the auditing accounts for the previous financial year. The process of valuing of assets such as infrastructure and inadequate resources in finance departments were also referenced.
While 19% of councils had their accounts for 2020-21 signed-off by auditors, 13% have not, leaving limited opportunity for public scrutiny of councils’ spending and financial health.
Woking recently become the latest council to issue a section 114 notice declaring effective bankruptcy after accruing a £2 billion debt driven by risky borrowing.
This has highlighted the potential consequences of widespread problems in audit processes and a lack of transparency.
Woking and other councils that have recently said they are cannot meet their legal requirement to balance the books, such as Slough, Croydon and Thurrock, have not published audited accounts for at least the last two years.
LG Improve warned that the perilous state of local government finances further emphasised the need for open accountability.
“At a time when there are well reported issues of poor local government financial health, it is not a good situation that the majority of accounts are unavailable,” it said.
A recent report by the National Audit Office said cumulative delays to external audits meant that 632 opinions remained outstanding for all years as of November 30 last year.
Councils have been required to appoint private firms to undertake their audits since 2018 following the abolition of the Audit Commission.
But the changes have coincided with a significant decline in the number of councils able to publish accounts by the deadlines set by government.
This has raised questions over both the viability of the audit market due to the level of fees offered and the complexity of work required to provide independent sign-off on accounts.
LG Improve found most councils that had failed to publish on time this year said they would do so when “reasonably practicable”, raising the prospect that detailed scrutiny will be delayed for some time.
There was variation in the proportion of different types of councils that had published their accounts by June 2.
Just a quarter of 32 local authorities in London had done so, compared to nearly half of county councils.
Appearing before a committee of MPs earlier this month, experts warned that audit delays threatened to undermine public trust in local democracy and processes of accountability.
Gareth Davies, controller and auditor general at the National Audit Office, said: “It is absolutely essential for timely, high quality accounts to explain how the money has been raised, how it is being used, and whether the authority is in a robust financial position.”
Also appearing before the Levelling Up, Housing and Communities Committee, Iain Wright, a director at the Institute of Chartered Accountants in England and Wales, warned that problems with audits undermine vital transparency.
“Council tax payers want to know how their money is being spent and, ultimately, local authorities accounts are the best way of being able to distil that,” he said.
The LG Improve research also highlighted evidence that raises questions over the ability of many councils to weather an unexpected crisis at a time of rising demand and costs.
Based on the 109 accounts available on June 2, cash reserves available to councils as a percentage of net revenue expenditure – a key indicator of resilience – fell by an average of 11% in 2022/23 compared to the previous year.
This fall is reduced when temporary funding for business rates relief allocated to reserves is taken into account, but this money cannot be used on day-to-day spending.
Across the board, 80% of councils saw some reduction in reserves but the size of the fall varied across different types of councils.
County councils saw an average annual reduction of 1% in 2022/23 while districts experienced a 10% drop.
Reserves available to district councils collectively still amounted to 173% of their net revenue expenditure, compared to an average of 59% for all councils.
London councils, unitaries and metropolitan boroughs saw annual revenue reductions of between 13% and 18%.
LG Improve said the data shows reserves falling “more rapidly and consistently” in areas with higher levels of deprivation and demand for services.
It added: “The extent of the fall in usable revenue reserves for a large number of authorities should give cause for real concern about financial health.”
The Department for Levelling Up, Housing and Communities has been approached for comment.