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Auditors are considering writing to deputy prime minister Angela Rayner over accounting weaknesses at the public body in charge of the Teesworks regeneration project in north-east England.
EY identified “significant” financial and assurance weaknesses within the South Tees Development Corporation during 2023-24 and concluded it had breached public accounting regulations.
EY has declined to sign off on last year’s accounts, stating that delays to their publication by officials had given auditors too little time to complete detailed work ahead of a government audit deadline at the end of this month.
The South Tees Development Corporation, which is chaired by the Conservative mayor of the Tees Valley, Ben Houchen, oversees the publicly funded regeneration of the Teesworks site in Redcar.
The former steelworks has been the subject of repeated controversy in recent years due to concerns over value for money, particularly in relation to its land deals with local developers. The UK’s largest brownfield site, the STDC aims to turn it into a major energy hub, including investments from BP and Equinor.
At the start of 2024, the Tees Valley review — an independent inquiry commissioned by the government — identified a host of governance failures and warned the body did not have sufficient arrangements in place to safeguard the public purse.
Auditor Forvis Mazars last year refused to sign off the STDC’s 2021-22 and 2022-23 books, stating it had run out of time to get assurance ahead of the deadline. It also pointed to “significant weaknesses” in value for money arrangements.
New auditor EY has now also declined to sign off the accounts for 2023-24, saying its auditors identified a “significant weakness” in the STDC’s internal financial and risk assurance capacity.
That weakness is “sufficiently serious”, EY said, that it may now issue a statutory recommendation under section 24 of the Local Audit and Accountability Act 2014.
Such a move, as previously taken in relation to crisis-hit councils such as Thanet and Croydon, would result in a formal recommendation to both the STDC itself and to Rayner, who is local government secretary.
The Financial Times reported in January that Rayner’s department was already minded to launch a National Audit Office inquiry into the STDC and its arrangements at Teesworks, although ministers have yet to make any announcement.
EY also found that the STDC had breached public auditing regulations by publishing its draft accounts three months late and failing to provide an accompanying annual governance statement.
When the STDC did subsequently publish that statement in November, EY found it inaccurately understated the seriousness of the Tees Valley review’s findings earlier that year, giving the “overall impression” that the review “did not raise any significant concerns”.
EY noted that while the STDC had “indicated” it would make a provision for the costs arising from last year’s failed legal action against PD Ports, in which it had sued the neighbouring port over access, it had not done so in its draft accounts.
The STDC has been contacted for comment.
In a covering report accompanying EY’s conclusions, going before the STDC’s audit committee later this week, STDC’s group financial controller Victoria Smith said the period in question was “an atypical time in the operations of the corporation with considerably increased workloads”.
She wrote that it had already worked to address the capacity issues highlighted by EY and to mitigate “the risk of weakness in the corporation’s arrangements to secure value for money in its use of resource”.
