Councils are in dire need of financial support to avoid filing for bankruptcy, revealed figures from the Chartered Institute of Internal Auditors (CIIA), while a lack of staff has added to the huge audit backlog.

The 2024-25 financial year is expected to prove difficult for local councils once again with 35% of chief internal auditors at local councils saying they are ‘likely to face severe financial difficulties’.

Unsurprisingly, 11% of respondents said they expected to file a section 114 notice this year, effectively rendering the council bankrupt. So far, six local councils have had to file this notice since 2021, with one in five still at risk of having to do the same.

Half of senior council figures said if there was no change then bankruptcy would be inevitable within the next five years.

Anne Kiem OBE, chief executive of the Chartered Institute of Internal Auditors said: ‘Our research underscores the potentially colossal financial challenges currently facing local authorities across the country, with many chief internal auditors warning us of severe impacts to the delivery of essential local services.’

As well as financial difficulty across local councils, 88% reported that they had not completed their audits, and half (48%) said a drop in the number of internal audit staff was to blame for this.

In addition, general staff shortages were to blame for 39% of local councils failing to complete work, while 32% said the team sizes were too small for the size of the job.

Kiem said: ‘We are increasingly concerned about the health of local authority internal audit teams, with many shrinking over recent years.

‘We would urge local authority leaders to resource their internal audit functions appropriately, to harness their full potential and ensure adequate independent assurance is in place where their major risks and long-term financial stability are concerned.’