An inquiry into financial reporting and audit in local authorities has been launched to ensure that councils are financially sustainable and remain accountable to their residents.

Launched today by the Levelling Up, Housing and Communities Committee, the inquiry will look at the purpose and understanding of local audit and the impact of local authority accounts and audit findings.

It will also explore how financial reporting at the local level could be made more accessible and the role of local audits in acting as a warning for councils facing financial difficulties.

Clive Betts, chair of the Levelling Up, Housing and Communities Committee, said: ‘Councils across England face a series of cost and service pressures. Many local authorities are struggling financially with some councils in recent months even warning that they could be forced to declare effective bankruptcy within the coming year. When council finances are under greater pressure than ever before, the need for effective financial accountability for local government is put into even sharper focus.

‘Local public bodies are responsible for billions of pounds of expenditure each year, delivering public services that taxpayers rely on every day. 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.

‘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. We will also want to explore how local audit fits into the “checks and balances” of how councils operate and the effectiveness of audit in acting as a “red flag” to councils to address financial issues.’