Agenda Item No. 6
THE VALE OF GLAMORGAN COUNCIL
AUDIT COMMITTEE: 25 JULY 2018
REFERENCE FROM CABINET: 18 JUNE 2018
C340 Proposal to extend the Shared Service for Internal Audit to include Rhondda Cynon Taf County Borough Council and Merthyr Tydfil County Borough Council (L) (Scrutiny Committee – Corporate Performance and Resources and Audit)
Cabinet approval was sought to propose a change to the current Internal Audit Shared Service to extend the Partnership Agreement to include Rhondda Cynon Taf and Merthyr Tydfil County Borough Councils.
In recent years, collaborative working activity had increased at pace in response to the challenging financial climate and also in recognition of the value that working in partnership to share skills, expertise and experience could have in tackling increasingly complex issues.
The provision of Internal Audit was 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 was set out in the Accounts and Audit (Wales) Regulations 2018 and prior to these the Accounts and Audit (Wales) Regulations 2014.
The Bridgend and Vale of Glamorgan Internal Audit Shared Service had been fully operational under a formal partnership agreement since February 2013, which had been extended to 31st January 2020 as both Authorities had experienced the advantages of the shared service. Since its inception the Shared Service had delivered consistently against the approved annual risk based plans and achieved the necessary coverage in order to issue a robust, evidence based audit opinion at the end of each year as well as fully complying with its statutory requirements under the Public Sector Internal Audit Standards (PSIAS). In addition, significant benefits had been realised by bringing the sections together, some of which included; effective use of the total audit resource, knowledge sharing and harmonising working practices and systems.
As such the IASS had and was achieving the following objectives:
- The service was affordable and represented value for money, delivering efficiencies and economies of scale;
- The service enhanced the professionalism and quality of audit services provided to both Councils through shared knowledge and best practice;
- The service was flexible and could respond to changing service requirements and priorities; and
- The service could extend access to specialist audit services and other related disciplines to both Councils;
- The service complied with the Public Sector Internal Audit Standards
The service had operated very effectively since 2013, however, the service had faced some challenges over the past 18 months in terms of recruitment, although this had presented the opportunity for a more proactive and focused approach being taken in respect of workforce planning and growing the service to ensure its continued success. As a consequence of this, Section 151 Officers of all four Councils had been considering whether there would be any benefits in extending the current partnership arrangement to include the two additional authorities.
The principal functions of the Internal Audit Sections at the four participating Councils were broadly similar. The development of a Regional Internal Audit Shared Service offered the opportunity to bring together related and complimentary professional disciplines across the Councils. Discussions had concluded that Internal Audit was a service that could be delivered on a regional basis and a larger shared service would benefit all the local authorities in many ways, including :
- The business case evidenced that overall savings could be made whilst ensuring the level of internal audit resources available would be sufficient to form an opinion on effective governance, risk management and control arrangements in place for each authority;
- The development of a larger service would provide career opportunities for staff which should encourage individuals to remain within the service ;
- The service would be able to develop specialist services ;
- The development of a shared service would meet the aspirations of Welsh Government with regard to increased regional working ; and
- The service would be more resilient than the current audit teams are in the existing arrangements.
In addition to the benefits highlighted above, the extended regional service could become more entrepreneurial in its outlook which could include bidding for contracts with other public sector bodies which would drive costs down further.
In order to develop an extended shared service, the following would be required :
A legal Partnership Agreement based on Section 101 / 102 of the Local Government Act 1972 should be entered into between the Councils to delegate the function and formalise the provision of services and basis for cost apportionment ;
All Councils would 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;
There should be a single employing authority. The proposal was that this should be the Vale of Glamorgan Council, however this was subject to agreement by the Cabinets of all the partner Authorities and Staff currently employed in the audit function by the Local Authorities would be subject to TUPE (Transfer of Undertakings - Protection of Employment Regulations) and transferred to the employing Council.
A new staffing structure should be implemented to ensure the RIASS was fit for purpose and able to deliver the level of service required. It was proposed that staff be transferred into the extended service on their current terms and conditions. The new staffing structure should then be implemented after all staff were employed by the employing Council. Joint working between the HR services in all authorities would be required to support this.
It was proposed that oversight of the RIASS would be a Joint Partnership Board comprising the respective Section 151 Officers (or their nominees) from each Council. The Board would monitor the performance of the IASS to ensure that it delivered the standards and expectations set out in the partnership agreement.
Whilst the partners would jointly oversee the performance of the RIASS, the responsibility for the adequacy of the whole system of internal audit would remain with the Councils themselves, who would remain responsible for approving audit plans and monitoring delivery via the Council's respective Audit Committees. This would be fully compliant with and would support each Audit Committee's Terms of Reference.
Individual Councils would 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 would 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.
Initial indications of the level of service required had been considered and the information had been used to determine the indicative costs of the service. The costs would be shared in proportion to the level of service required on a full cost recovery basis.
This was a matter for Executive decision
Cabinet, having considered the report and all the issues and implications contained therein
(1) T H A T the proposal that the Shared Service for Internal Audit be extended to include Rhondda Cynon Taf and Merthyr Tydfil County Borough Councils be approved
(2) T H A T the Vale of Glamorgan Council hosts the extended service and becomes the employer of all staff within the service.
(3) T H A T the Managing Director and the Section 151 Officer, be authorised in consultation with the Leader, to make the necessary detailed arrangements under delegated authority to establish the Regional Internal Audit Shared Service (RIASS) , including admission of further interested parties if appropriate subject to an agreed Partnership Agreement and Contract.
(4) T H A T a legal Partnership Agreement based on Section 101 / 102 of the Local Government Act 1972 be entered into between the Councils to delegate the function and formalise the provision of services and basis for cost apportionment
(5) T H A T the Head of Legal Services be authorised to execute the Partnership Agreement referred to in resolution 4 above.
(6) T H A T the report be referred to Audit Committee for consideration and approval.
Reasons for decisions
(1) To enable the extension of the current service to develop a Regional Internal Audit Shared Service that would reinforce business resilience, further enhance the range of audit expertise available to the Council and support the delivery of a more efficient service.
(2) To establish the Vale of Glamorgan as the host authority for the new shared service for internal audit.
(3-4) To enable the extension of the current service to develop a Regional Internal Audit Shared Service that would reinforce business resilience, further enhance the range of audit expertise available to the Council and support the delivery of a more efficient service.
(5) To provide the authority for legal to execute the legal documentation
(6) To enable the extension of the current service to develop a Regional Internal Audit Shared Service that would reinforce business resilience, further enhance the range of audit expertise available to the Council and support the delivery of a more efficient service.
Attached as Appendix – Report to Cabinet – 18 JUNE 2018