A SWAP deal sees cash-strapped Herefordshire Council making savings on where savings could be made.

Cabinet this week backed the contract for the council’s internal audit services going to the South West Audit Partnership (SWAP).

Members were recommended to select SWAP  over present provider KPMG – one of the biggest firms of its kind in the UK – that charged the council £236k for 300 days work.

SWAP would charge around £225k a year.

Cabinet delegated authority to  finalise contractual  arrangements - within the council’s approved budget - to the council’s Chief Finance Officer.

Also backed were recommendations that the council joined SWAP to become part owners of the local authority owned company at no cost, subject to approval by the SWAP Board and delegating authority to the CFO to be the council’s  representative on the SWAP board and to exercise the council’s vote at  shareholder meetings.

Internal audit is an essential backroom function for the council assessing the effectiveness and efficiency of operations, reliability of financial and management reporting, compliance with laws and regulations and the safeguarding of assets.

Cabinet was told that SWAP had a “proven track record” for delivering internal  audit services to 12 local councils on a not  for profit basis .

SWAP was selected as the preferred provider in February  after a market test that took in private and public sector providers as well as partnering  opportunities.

The council has separated from the shared services arrangement in has had with primary health providers in the county since 2010 when KPMG were appointed.

KPMG had a contract for three years from 2012/13 – 2014/15 but with an option to terminate on 30 days notice.

The council was charged £236k a year for 300 days work.

In reviewing the budget, the council felt that better value for money could be delivered from the contract and a £100k - or 40% - efficiency saving for the same level of service was proposed.

This was backed by the council as part of the  2014/15 – 2016/17 budget and market testing conducted into an approach offering the best value for money.

SWAP is a Teckal compliant company. That means it is exempt from UK procurement regulations  as outlined in the 2006 Public Contracting Regulations.

As a principle, Teckal  promotes greater collaboration between councils and the establishment of shared-services arrangements.

The principle can apply where a contracting authority can exercise the same  level of control over a wholly-owned entity that is similar to the control it  has over its own “in house” departments, with the  entity carrying out  the essential part of its  activities for that authority.

The control test can be satisfied even where the entity is covered by several authorities.

A Teckal exemption confirms that an authority does not need to run a procurement procedure where the exemption applies.

SWAP was started in 2005 with two initial partners and now has a membership including nine district, two county and one unitary council across five counties. It has  been Teckal compliant for just over a year.

The cost of the council’s contract with SWAP is expected to be around £225k a year - including  the in-house team – representing a saving of £100k saving on the current arrangement.

For this, the council gets  900 deliverable audit days compared to the current 850.