Audit watchdog rejects UK public sector accounts over unreliable data
- The National Audit Office (NAO) reported severe shortcomings in financial auditing processes for English local authorities, leading to unreliable public sector accounts.
- In the 2022-23 financial year, only 10% of local authorities submitted accurate spending accounts, resulting in warnings of potential financial crises among councils.
- The NAO's decision to disclaim government accounts reflects ongoing failures in local financial oversight that may require urgent governmental reform.
In the United Kingdom, the National Audit Office (NAO) has declared that the entire public sector financial accounts are not fit for purpose after a severe failure in the auditing process of local authorities. This assertion follows the NAO's unprecedented decision to disclaim the government's latest public spending figures, rendering them unverifiable due to unreliable financial data from numerous councils. Only 10% of local authorities submitted formal accounts that met reliability standards for the 2022-23 financial year, while half did not provide any accounts and others submitted unaudited versions. The NAO's concerns highlight the potential for more bankruptcy cases among local councils, exacerbated by systemic issues in the local authority audit framework. A historical context reveals that the audit crisis dates back to 2015 when the Audit Commission was abolished, shifting oversight to the private sector. The shortage of qualified auditors in England further complicates this issue, with only 106 individuals available to manage audits for hundreds of public bodies. Additionally, councils like Spelthorne have faced scrutiny for their financial management, particularly after engaging in high-risk investments, intensifying the calls for a reevaluation of the current audit practices. The NAO's leader has emphasized that the continuous delays in auditing council accounts impair the ability to ensure accountability in local governance, underlining the urgency of addressing these problems systematically. Plans to streamline the audit process are underway, including allowing councils to certify pre-2022-23 accounts without formal approval. However, experts caution that such measures may only offer temporary relief and are unlikely to satisfy the requirements set forth by the NAO. The government is also considering disbanding the Office for Local Government, which was intended to enhance scrutiny of councils, as ministers regard it as an inefficient entity. The combination of these factors creates an environment where accountability is increasingly difficult to maintain, leading to fears that more local councils may face dire financial crises if immediate reforms are not implemented.