Nottingham Business School (NBS) experts have called for immediate attention to the proposed radical reforms of the Local Public Audit (LPA) system.  

The proposed reforms, which aim to address the shortcomings of the current system, risk being overshadowed by more prominent devolution plans, potentially missing an opportunity to reinforce accountability in local authorities’ spending of public funds. 

LPA ensures that local authorities and other public services manage public money with due diligence, efficiency, and transparency. 

However, the system has been under strain since the 2010s reforms, most notably the dissolution of the Audit Commission in 2010, which transitioned the auditing process from a public to a private-sector-dominated model. 

The Local Audit and Accountability Act 2014, which allowed councils to appoint their auditors, has faced criticism for reducing scrutiny and raising concerns about transparency and accountability.  

By the 2022/23 period, only 1% of local authorities met audit deadlines, a stark contrast to the 97% compliance rate in 2014/15.  

An independent review led by Sir Tony Redmond in 2020 concluded that the fragmented system was unfit for its intended purpose, with a warning that significant financial risks could remain undetected. 

The Labour government has pinpointed three primary challenges within the current system: a lack of auditors, inadequate coordination among oversight bodies, and complex reporting standards.  

To tackle these issues, the government has proposed a series of reforms within the English Devolution and Community Empowerment Bill. These reforms aim to revamp the LPA in England, moving towards a mixed audit system supported by a robust central regulatory framework. 

Key among the proposed changes is the establishment of a new Local Audit Office (LAO) to centrally manage council audits, address backlogs, and maintain high-quality standards.  

The LAO will function independently, with responsibilities including the appointment of auditors, quality monitoring, and the publication of national reports. 

NBS Professor of Public Policy and Management Peter Murphy said: “The current system, designed to serve the public interest, has instead prioritised the needs of large private firms. This has led to a system which is universally acknowledged as flawed, and where early warning signs of local authority financial difficulties have been missed – we have seen the impact at struggling councils such as Nottingham and Birmingham.  

“However, they have been included in the same bill as the much more contentious and high-profile proposals for devolution and local government reorganisation and we are concerned they will go under the public’s radar. 

“Because these reforms affect a wide range of public services, it’s important that people understand what’s changing. Raising public awareness is essential – taxpayers need to be able to hold local services to account and feel confident that their money is being managed responsibly and in the public interest.”