England’s local audit system is broken. As of early 2024, hundreds of audit opinions on local authority accounts remained outstanding, some stretching back nearly a decade. The local audit backlog has left residents and central government flying blind on public finances worth over £120 billion a year. It’s the most serious audit accountability gap in English local government since the Audit Commission was abolished in 2015.
Why local audit fell behind
Three things broke at once. When the Audit Commission closed, its replacement system spread work across private firms competing for contracts through PSAA. But the fees were too low. Local bodies have complex accounts – pension fund valuations, property revaluations under CIPFA standards, group accounting for council-owned companies. The work grew harder while pay stayed flat.
At the same time, the pool of qualified auditors shrank. Experienced staff retired or moved to better-paid roles. Audit firms started handing back contracts they couldn’t staff. And the statutory deadline pressure created a vicious cycle – late audited accounts from one year pushed into the next. By 2023, some local authorities hadn’t received a signed opinion since 2015/16. Northamptonshire, Croydon and Slough all suffered financial collapses where findings came too late.
What is the backstop date approach?
The Ministry of Housing, Communities and Local Government (MHCLG) introduced backstop dates to reset the local audit system. The idea: set a hard deadline by which auditors must issue their opinion, even if the work isn’t fully complete. If they can’t finish in time, they issue a disclaimed opinion rather than holding everything up.
A disclaimed audit opinion means the auditor couldn’t obtain enough evidence to form a view on the financial statements. It’s different from a qualified opinion (which flags specific problems). A disclaimer says “we don’t know” – uncomfortable, but it draws a line under years of delay.
MHCLG confirmed on 27 February 2026 that the next backstop phase would target 2023/24 and 2024/25, aiming to get the local audit system back on track by 2027/28. Auditors who can’t complete before the backstop must disclaim. The goal: clear the backlog and move on.
What happens if you fail a government audit?
An authority that receives a disclaimed opinion faces real consequences. Credit ratings can drop, making borrowing more expensive. Central government may impose oversight. And public confidence suffers when finances can’t be verified.
But many local bodies received disclaimed audit opinions not because their accounts were wrong, but because auditors ran out of time. The backstop approach accepts that. It prioritises rebuilding assurance going forward over perfecting the historical record. That said, some bodies do have genuine financial reporting problems – the Section 114 notices at Croydon and Slough were symptoms of deeper failures that better-timed local audit work might have caught.
Rebuilding the local audit system
The rebuild goes beyond clearing old opinions. ARGA will replace the FRC and take responsibility for local audit quality, creating a proper local audit office function. PSAA awarded new contracts with higher fees. The Chartered Institute of Public Finance and Accountancy is simplifying accounting requirements. And the NAO is revising value-for-money reporting to reduce complexity.
Will it work? The early signs are mixed. Fee increases have helped recruit local audit staff, but the sector still needs more qualified people. The 2027/28 target is ambitious. But the alternative – letting the backlog rebuild – isn’t an option when statutory assurance is at stake.
Our local government audit service page covers the AGAR process and what auditors test. For context on how engagements work, see our audit process overview. We also work with housing associations navigating public sector requirements. Get in touch or call 0161 832 4451.
