An Investigation of the Governance within a Shared Internal Audit Service in Local Government

n 2005/6 circa 20% of English Local Authorities were sharing services (Tomkinson 2007), by
2017 this had risen to 98% (LGA 2017) saving £657m. Macdonald-Wallace (2016 p3) stated
“It is likely that from 2017, collaborative working will move from “nice to be doing” to “essential
for the survival of our organisation””. A shared service was defined by the Department of
Communities and Local Government as, at its widest, “…a shared service arrangement might
be defined as one where two or more authorities work together to commission and/or deliver
a service or function for the purposes of improving that service or function” (DCLG 2007 p.7).
Aldag and Warner (2018) indicate that a longitudinal study of shared services merits research
and Johnson (2017) summarised the need to study shared services further, in particular the
challenges and the way these challenges can be addressed. Tomkinson (2007 p.2) defines a
shared service as: "the shared provision by more than one local council of a specified service
in which service aims and objectives are mutually shared and for which local people are the
end customers". The specific shared service studied in this research is that of an internal audit
service. This service was chosen due to the dual reporting lines required in the internal audit
standards (Audit Committee and Senior Management) and the requirement for internal audit
to align with the organisation; these two elements were considered to be particularly
challenging for a “service model” (Tomkinson 2007) shared service model of delivery. This
research has contributed to the knowledge base in this field by studying a shared internal audit
partnership over a full year and identified what challenges it encountered and what actions
were needed to address these challenges.
The methodology is derived from a pragmatist perspective and considered the impact on the
shared internal audit service under review. Therefore this research looks to address in part
gap in knowledge indicated by Aldag and Warner (2018) and Johnson (2017) through the
action research of a shared internal audit service. A series of three action research cycles was undertaken to initially identify the challenges then test actions to remedy them. The data was
gathered regarding the challenges and the tools were constructed using semi-structured
interviews and focus groups with the participants. The Public Sector Internal Audit Standards
(2017) was used to assess the effectiveness of the shared internal audit service at the end of
each cycle. This provided a check that positive changes were being introduced. A
preintervention and post-intervention review was also conducted to initially establish the
relevant background information generated by a running records review; then after the cycles
to ascertain what had been completed in the longitudinal time frame of 1 year and also assess
what elements could potentially be generalised.
There were 13 thematic governance challenges identified that required a range of actions to
remedy. These challenges also resulted in the governance of the research site evolving to
address the move from a two-partner to a six partner shared service. Additionally, further
powers were devolved through the governance framework to enable more efficient and
effective control. This devolutionary aspect highlighted that although there are a range of
models of shared service delivery, there is still opportunity to improve the model. The
development of the Collaborative Business Management Framework highlighted that the
governance of a shared internal audit service requires wider governance consideration than
simple conformance testing of the Public Sector Internal Audit Standards 2017. Other findings
came through from the requirement for information flow to be managed more effectively
between the dual reporting lines at each partner and the internal audit team, this was identified
as the hourglass effect.
The pragmatist philosophical position and the action research strategy of this research has
resulted in the Collaborative Business Management Framework already making impact in the
real world and being used to underpin: An Institute of Leadership and Management (UK)
‘Approved’ professional training programme; also a new Collaborative Accreditation Review
scheme supported by the Local Government Association (LGA) UK.