Internal audit shared services

Report: 12
Date: 24 March 2011
By: Chief Executive

Summary

The report seeks approval for the MPA to enter into an arrangement with the Greater London Authority (GLA) for the MPA to discharge the GLA’s Internal Audit function, and to delegate authority to the Chief Executive of the MPA to approve all necessary actions and documentation to put the arrangements in place.

A. Recommendations

That Members:

1. Approve the MPA entering into an arrangement with the GLA for the MPA to discharge the GLA’s internal audit function, which will be provided by the MPA Directorate of Audit, Risk and Assurance from the 1 April 2011 under a shared service arrangement.
2. Delegate authority to the Chief Executive of the MPA to approve all necessary actions and documentation in order to put the arrangements under s.401A in place between the MPA and the GLA and to execute such documentation on behalf of the MPA.

B. Supporting information

1. The MPA are actively engaged in contributing to the Mayor’s initiative for shared services across the GLA group. Internal audit has been identified as a potential area for sharing services and progress has been made in working towards implementing this arrangement. In liaison with GLA officers a proposal for the MPA Directorate of Audit, Risk and Assurance to undertake the internal audit function for the GLA has been developed.

2. The proposal has been discussed and agreed with the Chair of the MPA and the MPA Chair of Corporate Governance Committee who are both supportive of implementing the shared service arrangement. The Chair of the GLA Audit Panel also supports the initiative.

3. On the 1 February 2011 the GLA Business Management and Administration Committee resolved;

“that prior to the Mayor’s Decision under section 401A of the Greater London Authority Act, to support the Metropolitan Police Authority’s (MPA) Shared Service Proposal for Greater London Authority (GLA) Internal Audit, which proposes that the MPA discharge the GLA’s internal audit function from 1 April 2011.”

4. The Mayor signed the Mayoral Decision Form approving the GLA to enter into this arrangement on 4 March 2011. The draft audit plan for the GLA drawn up in consultation with senior managers at the GLA was discussed at the London Assembly Audit Panel on 8 March 2011. MPA DARA will supply 350 audit days at a cost of £141,650, to the GLA this is based on full cost recovery. This equates to two full time staff equivalents.

5. The service will be provided within existing MPA resources and will not incur any additional costs. This has been achieved through an increase in audit productivity and a reduction in MPA audit need which has been determined as a result of the new strategic approach for MPA DARA, approved by Corporate Governance Committee in December 2010. Independent reporting lines will be maintained under the proposal and all work will be conducted in line with professional standards and ethical codes of conduct.

6. The proposal provides an annual saving of £25,000 to the GLA and across the GLA group will realise annual savings of £166,000.

7. Deloitte currently undertake the provision of the service and have confirmed that they do not have any employees working wholly or mainly on the contract. Employees are not, therefore, attached to the function, and no employees will transfer.

8. In developing the project there has been consultation with staff including representatives from both the GLA and the MPA.

9. The functional delegation documentation will cover all the working arrangements, in particular, review, termination and liabilities.

C. Other organisational and community implications

Equality and Diversity Impact

1. The audit strategic approach ensures equality and diversity risk and governance issues are evaluated and reported as appropriate.

Consideration of Met Forward

2. The arrangement provides better value for money for the both the MPA and the GLA group.

Financial Implications

3. The detailed financial implications are contained within the main body of this report.

Legal Implications

4. The GLA and MPA are under a duty to make arrangements for an internal audit function under the Audit Commission Act 1998 and related audit legislation. Both bodies are covered by section 401A of the Greater London Authority Act 1999 (as amended) under which the GLA can enter into arrangements with the MPA for the discharge by the latter on its behalf of functions of an administrative, professional or technical nature, which includes the internal audit function.

5. “Functional delegations” under this legal power have already been entered into with TfL for the GLA’s legal transactional finance and procurement functions, and the appointment of the MPA for internal audit is being arranged under the same principles. The Mayor has formally consulted the Assembly via the GLA Business Management and Administration Committee and this report seeks formal MPA approval in line with MPA financial regulations.

6. Administrative arrangements between public bodies that are in the public interest that do not involve the placing at a competitive advantage of any particular private sector commercial supplier generally fall outside EU public procurement rules particularly if the activity in question is performed on a cost recovery basis. Therefore the GLA can enter into an arrangement with the MPA under s401A without having to go through an OJEU public procurement process.

7. The Executive Director of Resources as the GLA’s Chief Finance Officer will continue to be subject to his personal statutory responsibilities concerning the proper administration of the GLA’s financial affairs notwithstanding the MPA’s appointment to perform the internal audit function.

8. The Police Reform and Social Responsibility Bill will, if enacted as it is set out at present, establish a new policing functional body, the Mayor’s Office for Policing and Crime (MOPC) which will replace the MPA. As the Bill states that the MOPC will be a functional body, section 401A of the GLA Act will apply to permit the proposed shared services arrangement to continue with the MOPC’s internal audit department performing that function for the GLA.

9. The work being transferred is currently outsourced to Deloitte, and both the GLA and the MPA have confirmed that there are no employees wholly or mainly assigned to the function and therefore there are no employees transferring.

10. Under sections 101 and 107 of the Local Government Act 1972, a Committee can delegate any of its functions to an employee of the Authority.

Environmental Implications

11. There are no direct environmental implications arising from this report.

Risk Implications

12. The risk of any potential adverse impact on the delivery of the audit service to the MPS will be managed by applying a robust performance management approach to the delivery of the GLA plan. Audit independence and appropriate reporting lines will be preserved under the proposal.

D. Background papers

None

E. Contact details

Report authors: Julie Norgrove, Director of Audit, Risk and Assurance, MPA

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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