An inquiry into financial reporting and audit in local authorities has been launched by the House of Commons’ Levelling Up, Housing and Communities Committee (LUHCC), following calls by ICAEW for more understandable local authority financial statements.

The inquiry will explore the “purpose, understanding and impact” of local authority accounts and audit, seeking answers to a range of questions centred on four key themes:

• users and uses of local authority accounts and audit;
• understandability and accessibility of local authority accounts and audit;
• making local authority accounts meet the needs of users better; and
• addressing findings in audits and sharing best practice.

The announcement follows ICAEW’s calls for a parliamentary inquiry into the purpose of local authority reporting. Its November 2021 submission to the Public Accounts Committee’s inquiry into the local government finance system pointed to the positive impact the 2016 Public Administration and Constitutional Affairs Committee report had on central government accounts. It stated that a similar inquiry for local government could support CIPFA/LASAAC with streamlining such accounts.

“Effective financial reporting at the local council level is important not only for delivering value for money for these services, but is also key to democratic accountability,” says Chair of LUHCC Clive Betts MP. “As a committee, we are keen for our inquiry to examine how local authority financial reporting could be improved to better engage with taxpayers and other stakeholders.”

Oliver Simms, ICAEW’s Manager for Public Sector Audit and Assurance, comments: “We’re pleased that the LUHCC has listened to our calls and launched this inquiry. We hope it will have a positive impact on the accessibility and understanding of local government financial reporting, in the same way that the 2016 PACAC inquiry, Accounting for Democracy, had on central government financial reporting.

“If local authority financial statements were better used and scrutinised, some recent financial failures might have been avoided and residents would have been aware of the risks their council was taking, so this is an important inquiry for the sector.”

The deadline for evidence submissions is 17 April 2023. ICAEW will be responding to the inquiry and is keen to hear the views of members and other interested parties. A virtual meeting to inform our response will take place at 10am on Tuesday 21 March 2023. Those interested in attending that meeting or keen to contribute their thoughts should email oliver.simms@icaew.com.