CABINET MEMBER FOR FINANCE – 17 MARCH 2009
PROVISION OF INTERNAL AUDIT SERVICES TO
BUCKINGHAMSHIRE COUNTY COUNCIL
Report by Assistant Chief Executive & Chief Finance Office
1. As a result of a restructuring of the Corporate Finance Teams in Buckinghamshire County Council, (BCC), they will have a vacant Chief Internal Auditor position with effect from 1 April 2009. Discussions are now well advanced between the Head of Finance (BCC) and the Assistant Chief Executive & Chief Finance Officer to take this opportunity for the two local authorities to work in collaboration with Oxfordshire providing a shared Chief Auditor for the two authorities for 2009/10.
2. Buckinghamshire County Council has also been exploring other options including the possibility of a fully integrated internal audit service across the Buckinghamshire County and District Councils. Following consultation between the Heads of Audit in each of the Buckinghamshire councils, a report was taken to their County and Districts Chief Executives Meeting (CADEX), on Friday 6 March 2009, proposing an approach to Oxfordshire CC with a view to providing a shared Chief Auditor for the two authorities for 2009/10. No decision was taken at the meeting, and further information was requested. It is anticipated a decisions will be forthcoming shortly.
3. In accordance with the Financial Regulations (E3) and the Financial Procedure Rules (77), “approval of the Cabinet should be obtained before any negotiations are concluded to work for third parties”. This report is seeking approval through a delegated decision by the Cabinet Member for Finance, to enter into a formal collaboration agreement with BCC, subject to the decision to be made by the Buckinghamshire Chief Executives.
Outline of the Collaboration
4. The agreement would be for Oxfordshire to share our Chief Internal Auditor, the Assistant Head of Finance (Audit), with BCC as an interim arrangement to run for twelve months from 1 April 2009 to 31 March 2010. The two internal audit teams in BCC and OCC would continue to operate independently, but headed up by the same Chief Internal Auditor.
5. The rationale of operating this as an interim arrangement for twelve months is with a view to establishing a fully integrated service across the two Councils by April 2010.
6. The collaboration has been discussed with the Chairman of the Audit Committee and with the Audit Working Group who were supportive of the proposal
Benefits to OCC
7. The Internal Audit Service at OCC is predominantly internally resourced with 11 FTE, plus a CIPFA Trainee with an outsourcing arrangement for IT Audit, and for Financial Management Standards in Schools Audits equivalent to 2.5 FTE. Whilst the service has successfully grown over the past three years, and continues to demonstrate efficiency by delivering more with the same resource, overall it remains a small resource base of skilled staff to deliver this statutory function. Ability to recruit skilled internal auditors either permanently or temporary using agency staff is a current issue throughout the South of England; therefore vacancies can have a detrimental effect on the performance of the team both in terms of volume and quality of output.
8. Several County Councils are currently investigating or have already entered into shared service arrangements, either voluntarily, or as a result of Local Government Review. Having a shared service provides many benefits including:
§ Greater resilience through having a larger pool of skilled resources
§ Increased staff development opportunities that should improve staff retention
§ Integrated training strategy
§ Uniformity in systems and processes, applying best practice
§ Maintaining an in house skills mix, including specialist audit skills that can be shared across the partnering councils.
§ Opportunity for continuous improvement and greater efficiency.
§ Single contracting for out sourced services.
9. Material cost savings is not a benefit that is likely to be derived directly from a shared services arrangement, (the benefits to be achieved are based around greater resilience, and maintaining a quality service); however having an effective system of internal audit is essential where cost savings are to be delivered in other service areas.
10. The twelve months interim arrangement with BCC would generate income to OCC, (estimated £30,000), which could be used to fund additional audit days for 2009/10, although this would only be a short term benefit. The real value is in the opportunity to use the twelve months to develop the strategy for a full integration of the two internal audit functions, and possibly extended to other public sector organisations.
11. The rational for a collaboration with BCC is as follows:
§ Opportunity as they have a vacant Chief Internal Auditor position;
§ Neighbouring authority of similar size;
§ Similarity of audit resource budgets and working practices;
§ Similarity of management information systems (SAP, SWIFT)
§ Requirement to undertake Financial Management Standard in Schools inspections across the County; and
§ Agreed joint working arrangements under Oxfordshire’s lead to the Thames Valley Police Authority.
12. The provision of services to a third party requires professional indemnity cover, and is an insurable risk. The cover to be provided is for £1million.
13. The key operational risk is one of capacity within the existing audit team, and the potential impact on the quality of service provided to OCC. Should this collaboration go ahead, and in conjunction with the collaboration with Thames Valley Police Authority, the Assistant Head of Finance will personally be delivering up to 60 days to external clients. The Internal Audit team is now fully resourced with experienced staff, both technically skilled and also their knowledge of OCC; The audit management structure is now fully established, with both the Audit Managers and the Principal Auditors capable of managing any additional responsibility that may be required as a result of this work; the income generated can also be used to buy in additional resource should it be required. This is therefore assessed as being low risk as service delivery to OCC will remain unaffected.
Financial and Staff Implications
14. There are no additional financial and staff implications to those mentioned in sections 1 – 13 of this report.
15. The Cabinet Member for Finance is RECOMMENDED to approve the provision of a shared Chief Internal Auditor role in collaboration with Buckinghamshire County Council for a period of 12 months.
Assistant Chief Executive & Chief Finance Officer
Background papers: Nil
Contact Officer: Ian Dyson, Assistant Head of Finance (Audit)