The eradication of the Audit Commission has led to the worsening of council audit performance, academics have argued.

In a report titled ‘Administrative Paralysis: The Marketisation of Local Authority Audits and the Breakdown of Accountability’, researchers from the University of Sheffield have highlighted the ‘significant deterioration’ in ‘audit timeliness’ since the Audit Commission was scrapped.

The paper highlights the increased audit costs and delays between 2018 and 2024, based on data about 300 local authorities.

Despite being designed to produce savings of above £50m per year, the report emphasises that the ‘reform ambitions have failed’, instead creating ‘market chaos’.

According to researchers, 68% of English councils’ audits were outstanding in 2022/23, with just 1% being finished without delays.

Researchers outlined that compared to Scotland and Wales, council audits in England were ‘notably weaker’ in performance, with the latter being found to have a 32% audit completion rate by June 2024, whereas Scotland and Wales achieved 88% and 91%, respectively.

The data also reveals a 238% rise in PSAA fee scales across the country due to ‘basic price hikes’ from 2022/23 to 2023/24.

‘Our key finding – that audit firms hiked hourly costs whilst presiding over the breakdown of local authority audit in England – would, in any other industry, be viewed as a moral hazard or a reward for failure’, reads the report.

Noting the ‘market concentration among a small number of private audit firms’, the paper advocates for a ‘new, centralised Local Audit Office (LAO)’.

However, researchers advise that the LAO must have ‘sufficient internal capacity to provide a public sector alternative to private sector local authority audit provision’.

An MHCLG spokesperson said: ‘We have taken decisive action to restore the broken audit system, providing £49 million to help councils clear backlogs – but we know there is more to do. This is why we will set up a new Local Audit Office to simplify the system and increase capacity by establishing public sector audit provision.

‘This will ensure the local audit system provides accountability, transparency, and value for money for taxpayers.’