Tees Valley’s leaders seem to be starting to get a grip at last on the governance shambles that culminated in recent warnings by ministers that their progress down the path of devolution and access to funding were at risk and by external auditors Ernst and Young (EY) that it would take years to restore assurance in their accounts, as reported by North East Bylines.
The new sense that Tees Valley Combined Authority (TVCA) and its offshoot South Tees Development Corporation (STDC) are finally facing up to reality comes in the latest annual governance statement for 2024/25 to be presented to the STDC’s audit and governance committee (AGC) tomorrow (15 May).
It lists a series of actions that will need to be taken and is very different in tone from the annual governance statement for 2023/24, signed by Houchen and then chief executive Julie Gilhespie and presented to the TVCA cabinet on 31 January, which complacently stated:
“It is our conclusion that the Combined Authority operates a satisfactory governance framework which supports the achievement of its policies, aims and objectives and meets all statutory requirements and ensures public money is used effectively and appropriately and is properly accounted for.”
The new governance statement takes account of the tumultuous events that have engulfed TVCA and STDC over the past two years. These have included an independent review into Teesworks, Britain’s largest brownfield regeneration site at Redcar, which found issues of governance and transparency that needed to be addressed and that standards expected when managing public funds had not been met; the issuing of a Best Value Notice to Tees Valley by the government; and Houchen’s resignation as chair of STDC and Middlesbrough and Hartlepool mayoral development corporations under pressure from the Ministry of Housing, Communities and Local Government (MHCLG). These events have been extensively reported by North East Bylines and others over the past two years.
Assurances needed
Now that Houchen is resigning, a recruitment exercise will be undertaken for a new STDC Chair. The new annual governance statement says that the STDC and its AGC will need to assure themselves that the resource is in place to ensure the timely and compliant production and publication of financial statements and the annual governance statement for 2024/25 and beyond. It goes on:
“The Development Corporation must be cognisant of the findings of the Tees Valley Review. The issue of the Best Value Notice on 3 April 2025, indicates a need to consider and review the approach taken by the TVCA to the recommendations of the Review, in respect of the Development Corporation.
“In order to address the concerns raised by the Corporation’s external auditor…the Corporation will require assurances that it is able to meet all appropriate statutory deadlines, including ensuring that adequate internal processes are in place. Without these assurances, the Corporation cannot be satisfied that it is able to meet all relevant deadlines.
“Learnings from the Tees Valley Review have been evidently beneficial, but the Corporation will need to assure itself that all appropriate changes and processes in respect of the recommendations of that Review are embedded. The Corporation will need to monitor the response to the Best Value Notice issued to the TVCA to ensure that any effect on the Corporation is identified and addressed.
“This annual governance statement identifies that whilst there are governance processes in place, there are identified weaknesses in internal controls which should be addressed to ensure sound governance. In addition to this, there are a number of risks associated with the Best Value Notice and letter issued to the TVCA [by the external auditors] which may have an impact on the Development Corporation. In that respect, the Development Corporation should be kept abreast of the work being carried out to address both of these to ensure it is able to continually review any identified risks to its governance.”
Comment
A covering report to the governance statement by the TVCA group chief legal officer says that “For the year 2024/2025 the draft annual governance statement identifies that whilst governance processes are in place, a number of events identify weaknesses in internal controls,” which seems like an understatement.
The proof of the pudding etc…Nevertheless it is a positive sign that the tough actions taken by the MHCLG in recent weeks have brought home to councillors the seriousness of the position they have allowed to develop throughout the TVCA group, including STDC as well as Middlesbrough and Hartlepool development corporations.
It is a good start that they are discussing a recruitment for a new STDC chair to replace. Houchen, who in effect appointed himself. The new man or woman, whoever they may be, faces a long and difficult task. The external auditors have warned, as we have seen, that it will take years for the accounts to be assured.
The new chair will also have to see if anything can be done to implement Recommendation 22 of the Tees Valley Review, which calls for a better deal for the taxpayer – if possible – from the Joint Venture agreement which placed a 90% share of Teesworks in the hands of two private developers. This will not be easy; TVCA received independent legal advice last year that amending the deal would require commercial renegotiation, as reported by North East Bylines in August.
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