CIPFA welcomes gov’s commitment to local audit reform

CIPFA has welcomed the Local audit reform: a strategy for overhauling the local audit system in England published by the Ministry of Housing, Communities and Local Government (MHCLG) on 18 December 2024. 

The strategy for overhauling the local audit system in England commits to a series of measures to fix the broken local audit system. 

These include a local audit vision with eight core principles, the establishment of a statutory and independent local audit office (LAO), with five strategic responsibilities – coordinating the system, contract management, ownership of the Code of Audit Practice, quality oversight and reporting and mandating audit committees. 

The government is also consulting on a number of specific proposals as part of this strategy, including:

• potential additional functions of the new LAO
• simplifying financial reporting requirements to ensure they are proportionate
• improvements to enhance capacity and capability in the local audit sector, such as the introduction of public provision
• strengthening the relationship between local bodies and their auditor
• reforming the audit regime

In response to the MHCLG local audit reform, Iain Murray, the Chartered Institute of Public Finance and Accountancy (CIPFA) director of Public Financial Management, said: “CIPFA fully supports the aim of this consultation to address the long-standing challenges in local audit, including the troubling backlog of audits that has hindered timely financial reporting. The establishment of the Local Audit Office is a positive step, but it’s vital that its remit is focused to avoid unnecessary duplication.  

“We also strongly advocate for the reform of local authority accounts. It’s crucial that we do not let the pace of reform stall while we wait for a new body to take shape. CIPFA is committed to ensuring that the financial reporting framework for local government is fit for the future, and we look forward to working with the government and other partners to make this a reality.” 

David Lyford-Tilley, CIPFA’s head of Standards and Technical, added: “The consultation on local audit reform presents a critical opportunity for meaningful change in the local government audit system. CIPFA welcomes the proposed creation of the Local Audit Office (LAO), which we believe will provide the much-needed focus and leadership to restore confidence in local audit. However, it’s essential that we ensure the role of the LAO is not overextended, particularly in areas where existing structures are functioning well.  

“We must strike a careful balance between reform and maintaining the integrity of current practices. The sector urgently needs improvements in financial reporting, and CIPFA stands ready to work with all stakeholders to drive forward these reforms.”