REPORT: Democracy Denied: Audit and accountability failure in local government

Decades of funding cuts, outsourcing and commercialisation have driven local government to the brink of collapse. Scrutiny is more important than ever, yet our research shows that local authorities and their auditors actively prevent residents from exercising their rights to hold councils to account over spending decisions.

Research for Action’s new report presents evidence of 155 citizen experiences of using the Local Audit and Accountability Act to scrutinise local government finances. It demonstrates serious accountability gaps, reveals the significant role played by private auditors in disempowering residents, and shows a concerning lack of accountability on the part of local authorities.

The Act gives the public the right to inspect council accounts and any related documents. Residents can also ask questions to the council’s external auditor, and if they believe spending could be unlawful or is not in the public interest, they can file an objection the auditor must consider. However, despite wide-ranging action from residents, auditors made no high court referrals and issued no public interest reports. 

Local government audit contributes to a deficit in oversight and failure to consider the public interest. Private audit firms who are supposed to scrutinise councils act in consultancy roles for them, as well as banks and companies authorities have contracts with. This is compounded with a fragmented oversight structure where no regulatory body is willing to intervene even though residents are sounding the alarm across the country. 

We argue for a wholesale rethink of local government audit that leaves no role for private companies. We also make interim recommendations about how to improve transparency and regulation as well as ensure the accountability rights are as widely used as possible.