Disclaimed opinions and missed deadlines: local audit reform cannot wait

In 2018/19 just over half of local bodies published audited accounts on time. By 2021/22 this figure had fallen to only twelve per cent of local bodies. And in 2022/23 this figure fell once again to only one per cent of local bodies.

To state the obvious, this is bad. Local authorities spent more than ï¿¡100 billion every year. Audit delays mean that we lack oversight of how these billions are being spent, hence undermining accountability and increasing the risk of both financial mismanagement and poor decision-making. This has ramifications beyond local government: last year the National Audit Office, for the first time ever, refused to sign off the Whole of Government Accounts because of the local audit backlog.

To tackle this backlog, last year the Government introduced a series of backstop dates. The first two, on 13 December 2024 and 28 February 2025, required local bodies to publish all outstanding audited accounts up to and including the 2023/24 financial year.

At the time, it was warned and the Government recognised that this would likely lead to hundreds of disclaimed audit opinions because auditors would not complete the audits in time. This has come to pass. Over 300 disclaimed audit opinions have been issued and more than half of local authorities have received one.

Disclaimed audit opinions are issued if an auditor cannot determine the accuracy of an organisation’s statement of accounts. It is worrying that this many disclaimed audit opinions have been issued. But it is not necessarily surprising and nor does it necessarily signify problems with the local authority.

More surprising is the fact that, despite these backstops, 21 local bodies — including 15 councils — have still failed to publish any audited accounts.

Some of these councils — Birmingham, Croydon and Slough — have issued S114 notices and are facing severe financial difficulties (read here how we suggest addressing local government financial difficulties!).

And for others, workforce issues appear to be the key factor. Lewes faced delayed in completing quality assurance checks, Warrington’s auditors withdrew their services, and turnover of staff combined with “limited scope for additional assurances” hampered Enfield. As we argued last year, addressing workforce shortages must be an urgent priority. It is great that the Government have recognised and proposed steps to this effect.

Whatever the cause, the failure of 15 councils to publish any accounts despite the backstop and the issuing of hundreds of disclaimed opinions highlight the local audit system’s systemic weaknesses.

Introducing backstops was a necessary intervention. The challenge is now not only to clear the backlog but, following on from the Government’s consultation on audit reform, to fully fix the local audit system by establishing a system leader, addressing workforce issues and reducing complexity.