MPs warn of impact of local government reorganisation on transparency of government finances

In a report on the WGA, the committee said it was likely that the National Audit Office (NAO) would be unable to give government’s overall accounts a clean bill of health for the third year running in 2024-25.

The decision of the Comptroller & Auditor General (C&AG) to disclaim these accounts for the first time ever for 2022-23 - meaning that he was unable to obtain sufficient, appropriate evidence upon which to form an opinion – was blamed on severe backlogs in English local authority audits.

The C&AG issued a disclaimed opinion again in 2023-24, “and there is no clear indication that this position will improve in the near future”, the committee said.

The report warned that the WGA is still failing to achieve its full potential due to poor-quality data, with the volume of unaudited data growing significantly (from 211 entities in 2021-22 to 280 in 2023-24).

The PAC called on the Treasury to consider how to enhance transparency, by distinguishing in the WGA between organisations that are absent due to lack of capacity, and those that are due to a lack of compliance.

The committee said: “This repeated disclaimer by the NAO highlights systemic weaknesses in local government financial reporting and local audit arrangements. The government’s ongoing reorganisation programme ending the two-tier system of local government and establishing new unitary councils could further hinder progress and complicate efforts to bring together more complete and transparent financial data through the WGA.

“The timing and delivery of local government reforms remains unclear, and the PAC is calling on government to set out the actions it has taken and will take to address the local audit crisis, with clear milestones for success rather than vague ambitions. Government should also outline how it intends to manage the complexities arising from local government reorganisation.”

The report also warns of a lack of transparency in devolved spending, with Scotland “second only to the local authority sector in its poor performance in submitting data to the WGA".

The PAC also highlighted a risk of a lack of accountability for money spent in the academies sector “due to a misalignment of financial reporting dates between these institutions and central government, resulting in the academies sector being entirely omitted from the WGA”.

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said: “An ideal Whole of Government Accounts would be a transparent document which any citizen could easily use to assess how the taxpayer’s pound is being spent. Unfortunately, with missing data still undermining its reliability and little indication of future improvements, a more apt name for this document would be Incomplete Government Accounts.

"Where the WGA can be useful at present is less in the light that it sheds but the shadows it casts, showing where more action needs to be taken – unaudited data from local government; a lack of consistent and comparable spending by academies in education; a lack of information on spending for devolved nations.”

He added: "The entire omission of the academies sector from the WGA is a serious shortcoming, though there are important discussions ongoing as to how this could be remedied, so that some information could be incorporated next year.

“This is also an area where we could see the risks of wholesale local government reorganisation made manifest, at a time when most local authorities are under great financial strain.

"Merging councils into larger authorities risks exacerbating the challenges of transparency from which the WGA already suffers. Against the headwinds of the local audit crisis, there has been some progress following heightened scrutiny by this Committee, including the establishment of a Local Audit Office.”

A government spokesperson said: “Significant progress has been made to fix England’s broken local audit system and strengthen the Whole of Government Accounts.

“We have also given councils certainty on local government reorganisation by setting out clear timelines and have written to councils undergoing reorganisation to outline how they can prepare for audit.”