Among the multi-layered answers to “how did we get in this mess?” over Croydon’s, and other local authorities’, financial crises, Big Eric Pickles and his 2011 Localism Act goes a long way to explaining how Town Halls across England and Wales, once the heart of civic pride, descended into such a shambolic state.
Under Tory austerity, with councils squeezed of cash from government, they were now expected to hire in private audit firms. And you know how well that has worked…
Covid did not help, with firms such as Grant Thornton, Croydon’s external auditors, unable to keep up with the backlog of local authority accounts. Croydon’s accounts have been published late for five successive years now.
Quietly, something is being done to try to fix the mess created by Pickles and the Tories, and provide more timely public scrutiny and checks on Town Hall finances.
The English Devolution and Community Empowerment Bill, published last week, outlined the government’s plans for a new Local Audit Office, 10 years after Pickles closed the Audit Commission.
Claire Holland, the Labour leader of Lambeth Council who is chair of city-wide body London Councils, welcomed the Bill, describing it as “important”.
Holland said: “London boroughs fully support these aims.”
New powers: local government minister Jim McMahon with the local devolution bill last week
But some who have delved into the detail of the Bill have expressed concerns that the draft legislation “is worryingly thin on detail”, especially over its enforcement powers.
The scrapping of the Audit Commission in 2015 has “resulted in declining quality of audits and a backlog that has obscured up-to-date information of the entire sector’s financial position”, according to public interest co-operative Research for Action.
According to the Bill, the Local Audit Office will take on responsibility for auditor appointments, fees and maintaining a register of audit providers. It will also prepare the Code of Audit Practice, and could itself become an audit provider.
Some of the government’s previous commitments on audit transparency and accountability – such as local audit health and public interest reports – have not been included in the legislation. Grant Thornton’s PIP in October 2020 was the first, official admission that Croydon’s finances were in a state of collapse, prompting the resignation of the then council leader and followed soon after by the council’s first Section 114.
Research for Action’s FJ Malinen said: “The government could have not acted sooner to create a national body that will simplify the current audit regime that has led to a crisis.
“It is good to see that the bill leaves open the possibility for the Local Audit Office to act as a public provider of audit, but we are concerned this will not be enough to tackle the failing market if private provision remains the norm.
“The draft legislation is worryingly thin on detail about the Local Audit Office’s regulatory role, especially what comes to enforcement powers.
“We believe the Local Audit Office should have a remit for carrying out regular investigations on cross-cutting issues, tackle fraud and corruption, and set up a complaints and appeal process for audit that is open to the public.
“The government has previously said that the Local Audit Office would be underpinned by values including transparency and stronger accountability, but we do not see any detail on how it will put those values into practice. There is no mention of the public or civil society’s role as stakeholders, or access to information or public accountability rights.
“Audit reform should put public interest at its heart.”
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