MPs have warned that local government reorganisation could further undermine efforts to fix deep-rooted weaknesses in the UK’s public finances.

In a critical report on the Whole of Government Accounts (WGA), the Public Accounts Committee (PAC) said missing and unaudited data continue to erode confidence in the £1tn consolidated statement, which covers more than 10,000 public bodies.

The National Audit Office (NAO) has disclaimed the accounts for the past two years due largely to severe backlogs in English local authority audits and – according to the PAC report – will likely withhold approval of the Government’s accounts for a third consecutive year.

The PAC cautioned that plans to replace two-tier councils with new unitary authorities could ‘further hinder progress and complicate efforts’ to fix the already strained audit systems.

It said the timing and delivery of local government reforms remains unclear and called on the 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.’

PAC chair Sir Geoffrey Clifton-Brown said local government audit could be the area where the risks of wholesale local government reorganisation are ‘made manifest.’

‘Merging councils into larger authorities risks exacerbating the challenges of transparency from which the WGA already suffers,’ he said.

‘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. We will keep pushing Government to fulfil the WGA’s potential as a truly useful window into the state of the nation’s finances.’

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.'

Want to learn more about local government reorganisation? Check out: Local Government Reorganisation: What It Means and Why It Matters.