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Auditors have refused to sign off two years of accounts at Lord Ben Houchen’s Teesside regeneration body, while also pointing to “significant weaknesses” in its value for money arrangements.
Mazars said it was unable to give an opinion on the 2021-22 and 2022-23 financial statements for the South Tees Development Corporation (STDC) because it had run out of time to hit the government’s accounting deadline.
As part of the audit process, Mazars was required to provide a view on whether the body was delivering value for money during the period.
It relied on the findings of an independent Tees Valley review into the STDC published earlier this year, and concluded there were “significant weaknesses in the corporation’s arrangements for financial sustainability, governance and improving efficiency, economy and effectiveness”.
Governance at the Houchen-chaired STDC, which was set up in 2017 to regenerate the vast Teesworks steel site in Redcar, was heavily criticised by January’s review.
That inquiry, launched under the last government because of concerns about financial arrangements, concluded that internal public sector processes had been insufficient to safeguard value for money. So far Teesworks has cost the taxpayer more than £500mn in grants, alongside £450mn in expected borrowing.
The review issued 28 recommendations but did not make a judgment on whether value for money had been achieved.
That determination was left to external auditor Mazars, which had put its audit of the 2021-22 accounts on hold while the review was ongoing.
Mazars resumed its auditing work following the review’s publication in January. STDC audit committee minutes show Mazars has since repeatedly said it needed more time to consider value for money.
In its audit letter, dated November 28, the firm said that it had run out of time to complete its audit of accounts for both 2021-22 and 2022-23 to meet a government-mandated deadline of December 13. It has therefore issued a “disclaimed opinion”.
But it found “significant weaknesses in the corporation’s arrangements to secure economy, efficiency and effectiveness in its use of resources”, citing the findings of the Tees Valley review.
A spokesman for STDC said the Tees Valley Review’s findings meant auditors had “no alternative than to reach this opinion for the value for money statements” covering 2021-22, 2022-23 and also 2023-24, which is currently being audited by EY.
Improvements had been made this year to the organisation’s governance arrangements, said the spokesman, adding: “The auditors made no additional recommendations or findings over and above those made by the Independent Review.”
Mazars declined to comment.
The STDC and Teesworks have proved highly controversial, in particular because of the decision made in 2021 to hand 90 per cent of the site’s development vehicle, Teesworks Ltd, to two local developers at zero consideration.
The resulting Tees Valley Review found no evidence of corruption, but raised a catalogue of concerns about governance, procurement and financial processes.
During the general election campaign, Labour promised to follow up those findings with a full National Audit Office investigation, but has yet to launch a probe since taking office.
Lord Paul Scriven, a Liberal Democrat peer who has been pushing ministers for an update, said the lack of external audit assurance from Mazars was “breathtaking” nearly a year after the original review reported, adding: “The government can no longer sit on the fence.”
The Ministry for Housing, Communities and Local Government said it was considering the STDC’s response to the review and would “respond in due course”. It did not comment on the disclaimed accounts.
The organisation’s audit process has been further complicated by the wider crisis in local government auditing.
In July the government imposed a December 13 publication deadline for all local government accounts, up to and including the 2022-23 financial year, in order to address a spiralling backlog across the sector.
Local government minister Jim McMahon admitted that there were likely to be “hundreds” of disclaimed audit opinions as a result.
