Governance is under fire at the devolved body chaired by Sir Ben Houchen

Management arrangements at the combined authority in north-east England chaired by Conservative mayor Lord Ben Houchen have come under increasing criticism from outside experts, according to documents obtained by the Financial Times.

The Tees Valley Authority, which oversees the Teesworks redevelopment project, failed to meet adequate internal audit standards, an independent review has concluded. A second review found that oversight was hampered by “mistrust” and “antagonistic” relationships. documents has shown.

The following findings long-standing controversy on value for money at Teesworks and public sector management of the company’s operations.

However, they will also have wider implications beyond Teesside, given the role devolution plays in the new Labour government’s growth agenda. The Tees Valley Combined Authority is one of several such devolved bodies in England tasked with economic development for their regions, chaired by directly elected mayors.

The Centre for Governance and Oversight, a think tank focused on promoting better governance and security, concluded that “confrontational” behaviour between the mayor and local councillors led to “distracted, ineffective and heated interactions”, according to the documents.

The results showed that the monitoring was “ineffective”.

The Institute of Public Finance and Certified Public Accountants alone concluded that most of the internal auditing standards set by the country were not fully met.

The accounting agency said it had not conducted any internal audits in 15 months.

The two bodies were invited to review governance arrangements at the combined authority following an earlier independent review of Teesworks, a public-private partnership aimed at regenerating the old steel mill at Redcar.

That review concluded in January that insufficient public sector management processes were in place to protect value for money. The project had cost taxpayers more than £500m while proving profitable for private development partners.

The report recommends bringing in outside experts to take a closer look at the combined agency’s oversight processes.

In a report on its monitoring and inspection activities published this month, the CfGS said some of the weaknesses were also common to other combined agencies.

But the report noted an “antagonistic relationship” between Houchen and the commissioners tasked with overseeing his decisions, as well as “mistrust” of his officials among commissioners.

The report also pointed to “issues surrounding the mayor’s attendance” at oversight meetings, along with “the conduct of the mayor and members of the commission during the mayor’s attendance.”

The report found that neither councillors nor the combined authority’s executive board undertook “meaningful preparation” ahead of such “purposeful” occurrences.

The report said there was a need to re-establish relationships and reach local agreement on specific issues that councillors were allowed to scrutinise.

CIPFA reviewed internal audit arrangements at the Tees Valley combined authority and found that only four of 11 nationally defined “public sector internal audit standards” were fully met.

These standards include a requirement that the agency self-assess its internal audit activities.

The accounting agency said that although the competent authority claimed to have done so, “many requests” had not yet been provided with documents.

A further investigation found “no evidence” that such an investigation existed, the report said, adding: “We therefore conclude that no self-assessment was undertaken.”

TIAA said that since the new internal auditors were appointed in the spring of 2023, no internal audits have been completed.

CIPFA also raised concerns about the audit arrangements for the three Tees Valley Mayoral Development Companies, the independent redevelopment bodies tasked with assembling land and speeding up development.

The MDCs in Middlesbrough and Hartlepool, both of which were established more than a year ago, have yet to hold an audit meeting, the report said. “This is a significant governance issue that needs to be addressed urgently,” the report said.

KPMG has now been appointed to audit the MDCs in Middlesbrough and Hartlepool, the TVCA said, adding that internal audit reviews have been scheduled for the 2024/25 cycle.

CIPFA has issued six urgent recommendations, including for the authority to undertake separate internal audit schemes for relevant bodies such as the MDC, for the publicly owned Teesside airport and for the public-private partnership to regenerate the Teesworks steelworks at Redcar.

TVCA stressed that the assessment was “outdated” and did not reflect any changes made since then.

“Since publication, we have been working hard with our local authority colleagues to respond to the Independent Review’s recommendations — and the whole purpose of this work is to address many of the points raised in these two reports,” the report said.

“Most of the points raised by CIPFA are historical in nature — and the work that has been undertaken and arranged in response to the Tees Valley Review is addressing these issues,” the report added.