Agenda Item No


The Vale of Glamorgan Council


Audit Committee 23rd February 2012


Report of the Director of Finance ICT and Property


Development of a Shared Service for Internal Audit with Bridgend County Borough Council


Purpose of the Report

1.             The purpose of this report is to update the Audit Committee on the progress to develop a full shared service for Internal Audit with Bridgend County Borough Council.


THAT the Audit Committee considers the current position and recommends that Cabinet:

1.             Approves the proposal that the Vale of Glamorgan Council hosts and becomes a partner in the Internal Audit Shared Service (IASS) with Bridgend County Borough Council.

2.             Authorises the Head of Paid Service and the Section 151 Officer, in consultation with the Leader, to make the necessary detailed arrangements under delegated authority to establish the IASS, including admission of further interested parties if appropriate subject to an agreed Partnership Agreement and Contract.

Reasons for the Recommendations

1-2    To facilitate monitoring of the proposal to establish a shared service for the Internal Audit function.


2.             The provision of Internal Audit is recognised by all councils as core to their effective governance, risk management, and control arrangements.  The requirement for councils to maintain appropriate and effective internal audit arrangements is set out in the Accounts and Audit (Wales) Regulations 2005.

3.             Cabinet approved the implementation of a temporary shared service arrangement for Internal Audit Manager with Bridgend County Borough Council (Bridgend CBC) in December 2009, effective from 1st January 2010.  Further specific reports on progress have been submitted to the Audit Committee on 4th February 2010 and 21st September 2010 with regular updates also provided by the Head of Accountancy and Resource Management Audit in his capacity as Head of Internal Audit in providing an opinion on the adequacy of the Council's internal control arrangements. 

4.             A three-phase Business Case has been developed, with the third phase being endorsed by the two Council's Joint Working Programme Board in May 2011.  Phase three will realise the option for the provision of a fully integrated Internal Audit Shared Service (IASS).  With the success experienced by sharing the Internal Audit Manager (phase one), it was considered that the next natural progression would be to integrate all staff in one location and second staff from Bridgend CBC to the Vale (phase two).  This has been successfully achieved and has been fully operational since May 2011 with staff both from the Vale of Glamorgan Council and Bridgend CBC coming together and being located at the Innovation Centre situated on the boundaries of both Councils in Ewenny, Bridgend.  

5.             Phase three of the Business Case is to create an IASS which will deliver a full, professional internal audit service to meet the needs of the Councils and the requirements as defined in the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Internal Audit in Local Government in the United Kingdom 2006.

Relevant Issues and Options

6.             The stated aim of the IASS project is to provide a shared service solution, focused on a series of identifiable and measurable objectives, in which both Councils have an equal share in terms of control, direction and influence.

7.             As such the IASS should achieve the following objectives:

Is affordable and which represents value for money;

Enhances the professionalism and quality of audit services provided to both Councils through shared knowledge and best practice;

Is flexible and can respond to changing service requirements and priorities;

Extends access to specialist audit services and other related disciplines to both Councils;

Delivers efficiencies and economies of scale;

Improves the investment in staff training and development and provides opportunities for career progression for staff within the service.

8.             In order to meet this the Phase Three business case recommended that:

There should be a single employing authority which should be the Vale of Glamorgan Council.

Staff currently employed by Bridgend County Borough Council should be TUPE (Transfer of Undertakings - Protection of Employment Regulations) transferred to the Vale of Glamorgan Council.

A new staffing structure should be implemented to ensure the IASS is fit for purpose and fit for form.

The new staffing structure should be implemented after all staff are employed by the Vale of Glamorgan Council.

A legal Partnership Agreement based on Section 101 / 102 of the Local Government Act 1972 should be entered into between the two councils to delegate the function and formalise the provision of services and basis for cost apportionment.

9.             Both Councils will be required to sign-up to the terms and conditions of this document for a set period of time (proposed minimum of three years) in order to demonstrate commitment.

10.        Overseeing the IASS will be a Joint Partnership Board comprising the respective Section 151 Officers (or their nominees) from each Council.  The Board will monitor the performance of the IASS to ensure that it delivers the standards and expectations set out in the partnership agreement. 

11.        Whilst the partners will jointly oversee the performance of the IASS, the responsibility for the adequacy of the whole system of internal audit will remain with the Councils themselves, who will remain responsible for approving audit plans and monitoring delivery via the Council's respective Audit Committees.

12.        The individual Councils will continue to be responsible for overseeing the effectiveness of the internal audit function at Council level, and holding the Head of Internal Audit to account for delivery of the approved Audit Plan.  They will also be responsible for the effectiveness of their governance, risk management and control arrangements, hold managers to account for delivery and receive regular progress updates on internal audit work; consider key themes and issues, and take them forward as necessary.

13.        Initial indications of the level of service required have been considered, and this information has been used to determine the indicative costs of the service.  The costs will be shared in proportion to the level of service required on a full recovery basis with the overall position being cost neutral in terms of the existing budget.

14.        The coming together of the two divisions has also identified a need for a new organisational structure to be implemented as part of the process.  This will have the impact of reducing the number of full time equivalent (FTE) posts between the two divisions at present (29) to a maximum of 24 under the new IASS. A copy of the proposed new structure is attached.

Resource Implications (Financial and Employment and Climate Change, if appropriate)

15.        Savings to the Vale totalling £28k per annum have already been realised through the sharing of the Council's Principal Auditor. For 2011/12 it is expected that the Vale budget allocated for the service will achieve an underspend in the region of a further £35k. Further savings are expected to be achieved as the new IASS structure is developed.

16.        Legal and Human Resources support is being received in order to ensure that the process of employee transfer to the Vale of Glamorgan Council is handled in accordance with the law.  Consultation is underway on the transfer arrangements and is being worked through with those staff affected and the Unions.  Further consultation will then take place with all staff on the new IASS organisational structure after transfer arrangements have been agreed.

17.        The IASS will employ agile working practices including hot-desking, home and site working together with the innovative use of ICT in order to minimise travel costs and their associated impact upon the environment.

Legal Implications (to Include Human Rights Implications)

18.        Provision of an adequate and effective Internal Audit function is a legal requirement under the Accounts and Audit (Wales) Regulations 2005.

19.        The IASS will be underpinned by a legally binding Partnership Agreement and Contract to protect the interests of both Councils.

Crime and Disorder Implications

20.        Pursuing initiatives to prevent, detect and deter crime is encompassed within the terms of reference under which the audit function operates.

Equal Opportunities Implications (to include Welsh Language issues)

21.        The initial IASS structure will be ring-fenced to existing internal audit staff and the process of matching and competition for posts will be part of the consultation process with staff and Trades Unions.

Corporate/Service Objectives

22.        The work of internal audit is intended to assist in the achievement of all corporate and service objectives.

Policy Framework and Budget

23.        The proposals in this report are in accordance with the policy framework and budget.

Consultation (including Ward Member Consultation)

24.        No further consultation is proposed.

Relevant Scrutiny Committee

25.        Corporate Resources.

Background Papers



Contact Officer

Helen Smith - Principal Auditor Tel: 01656 754901


Officers Consulted

External Audit Manager - Grant Thornton UK LLP


Responsible Officer:

Sian Davies - Director of Finance ICT and Property.