Lord Ben Houchen’s Tees Valley Combined Authority (TVCA) has been warned by the government that it cannot expect to progress any further down its devolution path until it clears up its audit problems. It faces a tight new set of deadlines and has also been warned that trust in its finances will take years to rebuild. Its funding may be restricted, and it could face further statutory action if it fails to improve.
Deputy Prime Minister Angela Rayner’s Ministry of Housing, Communities and Local Government (MHCLG) and Tees Valley’s external auditors Ernst and Young (EY) have together dealt the severest blow yet to the combined authority and South Tees Development Corporation (STDC).
Both bodies have been at the centre of a long running scandal over Teesworks at Redcar, Britain’s largest brownfield regeneration site. The affair has been well documented by North East Bylines and others for two years.
The TVCA cabinet will hold an extraordinary meeting on 14 May when it will be presented with two letters from the MHCLG and the auditors.
The auditors’ letter
EY has submitted three statutory recommendations to the Ministry about TVCA’s accounts, as North East Bylines reported on 21 February it was considering doing, stipulating the action that TVCA must take. They are:
- strengthen its finance team so it can carry out its audit work programme and meet its statutory reporting obligations;
- ensure that the statutory requirements for the public inspection of its accounts are satisfied; and
- set out a clear timetable for the production of the 2024/25 statement of accounts, including the annual governance statement, enabling deadlines for the public inspection and completion of audit to be met.
The first deadline is that the Combined Authority must consider these recommendations at a public meeting by 14 May, which it considers it is doing be taking them to the extraordinary cabinet meeting, which will meet in public, next Wednesday – the last possible day. Officials are recommending that the auditors’ recommendations be accepted in full. If approved, they will be incorporated into the TVCA’s Best Value Notice Improvement Plan.
Other significant deadlines are that the public inspection period of the accounts must start by 1 July and the audit be completed by 30 November.
EY’s letter reports repeated delays and difficulties in completing its audit: “We have received only limited engagement from the Authority on planning for our 2024/25 audit and encountered a number of challenges in being able to progress with our audit planning procedures, which is of concern.”
The auditors warn: “The process to rebuild assurance over the Authority’s financial statements following three years of disclaimed audit opinions will itself take several years. It is therefore important that the period for which audit procedures cannot be completed does not extend beyond the year ended 31 March 2024.”
The government’s letter
Damning though the EY letter is, the real sting is in that from the MHCLG. Writing to TVCA chief executive Tom Bryant, the Ministry starts with the relatively innocuous statement that: “This notice is a formal notification that the Department has concerns regarding your Authority and requests that the Authority engages with the Department to provide assurance of improvement. The Department expects authorities that have been issued with a best value notice to continue leading their own improvement.” It adds that these concerns relate primarily to governance, culture, partnerships and continuous improvement.
The reference to partnerships may mean the controversial Joint Venture (JV) Partnership between STDC and two businessmen who now have a 90% stake in Teesworks.
The Ministry will look to the Local Government Association and the auditors for updates and broader assurance that the necessary changes are being made at sufficient pace and review the position in 12 months.
The MHCLG letter concludes with a clear warning about Tees Valley’s further progress down the devolution path and a nuanced warning about future funding:
“We are conscious that this decision will have implications for the Authority’s progress towards Enhanced Mayoral Strategic Authority status and the granting of an Integrated Settlement [a single funding pot for a range of functions]…
“While the Authority may continue to receive and be awarded government funding whilst under this notice, we would emphasise that receipt of funding does not indicate the Department’s broader view of the performance of the Authority, nor would it indicate any change in the status of this notice, with individual funding programmes being managed and assured independently by their respective departments…failure to demonstrate continuous improvement may be judged to contribute to best value failure and the Secretary of State will consider using [statutory] powers as appropriate.”
Comment
This is a bombshell for TVCA, even in the context of the shocks it has experienced over the past two years as a result of the Teesworks scandal. Its progress towards further devolution has been halted, its future government funding will probably be at a minimum, confidence in its accounts will take years to rebuild and it faces further statutory action if it fails to improve – possibly a takeover of the running of the Authority by government commissioners..
This is down principally to one man – the mayor, Lord Ben Houchen – not only because of the formal elected position he holds but also the dominant personality he has created for himself. But his cabinet and the backbench councillors on TVCA’s overview & scrutiny and audit & governance committees cannot escape their share of blame due to the feeble control and scrutiny they have exercised.
CLICK HERE TO DONATE TO OUR CROWDFUNDER
HELP US BECOME STRONGER SO THAT WE CAN CONTINUE TO DELIVER POWERFUL CITIZEN JOURNALISM!
