Forvis Mazars Drops the Audit Hammer on TVCA’s Accounts

The world of accounting may not always be a nail-biter, but when an auditor refuses to sign off on accounts, heads turn, and questions fly. That’s exactly what happened with Forvis Mazars and the South Tees Development Corporation (STDC). With £500 million of taxpayer money already sunk into the project, Forvis Mazars declined to provide an opinion on two years of financial statements. It’s a tale of deadlines, governance chaos, and hefty taxpayer costs. 

So How Did We Get Here? 

The story of the STDC is anything but straightforward. Established in 2017 to revitalize the Teesworks steel site in Redcar, the corporation promised to transform the local economy. But by 2021, questions were already swirling. In a controversial move, 90% of the site’s development vehicle, Teesworks Ltd, was handed over to two local developers at zero cost. The deal, involving £500 million in taxpayer funding and an additional £450 million in anticipated borrowing, raised eyebrows and triggered scrutiny. 

Enter the Tees Valley Review. Published in early 2023, it uncovered significant governance gaps, procurement missteps, and financial inefficiencies. While it found no evidence of corruption, the review offered a laundry list of 28 recommendations to improve transparency and accountability. As the review unfolded, Forvis Mazars paused its audit of STDC’s 2021-22 accounts. They resumed work after the review’s findings were released, only to encounter a governance framework they described as fraught with "significant weaknesses." 

Deadlines and Disclaimed Opinions  

Fast forward to December 2024, and the situation has only grown more tangled. Facing a government-mandated deadline of December 13, Forvis Mazars announced they could not complete the necessary procedures to provide an audit opinion for STDC’s accounts for 2021-22 and 2022-23. The result? A “disclaimed opinion”—the audit world’s equivalent of waving the white flag. 

In a letter dated November 28, Forvis Mazars explained, “We were unable to complete all the procedures we deem necessary due to insufficient time.” They cited the tight deadline imposed by the government, which required all local authorities to publish their accounts by mid-December. But the clock wasn’t the only issue. The firm also highlighted enduring governance weaknesses at STDC, echoing the findings of the Tees Valley Review. “Our assessment identified significant shortcomings in financial sustainability, governance, and operational efficiency,” the auditors stated. 

For its part, the STDC pushed back against the perception of fresh failures. “The auditors made no additional recommendations or findings over and above those made by the Independent Review,” a spokesperson said. They emphasized that steps have been taken to address the governance issues flagged earlier in the year. Tees Valley Mayor Ben Houchen echoed this sentiment during a recent board meeting, saying, “The weaknesses identified by Forvis Mazars are entirely mirrored from the Tees Valley Review. No new concerns have been raised.” 

What’s Next for TVCA’s Audit Woes?

The fallout from Forvis Mazars’ decision to disclaim TVCA’s accounts underscores deeper issues in governance and accountability, with implications reaching beyond the Tees Valley. Across the UK, local authorities face mounting pressure to meet the deadline, but with only 1% of councils publishing accounts on time last year, delays and disclaimed opinions are expected to persist. Critics, including Liberal Democrat peer Lord Paul Scriven, have called for government intervention, labeling the lack of audit assurance “breathtaking.”

For TVCA, the focus now shifts to Ernst & Young, its next auditor for the 2023-24 accounts. Early signs suggest another disclaimed opinion may be on the horizon. While the corporation touts recent governance reforms, these changes can only influence future audits, leaving historical issues unresolved. As the saga continues, taxpayers are left questioning the oversight of public funds, and auditors are reminded of their ethical duty to refuse sign-offs when assurance is lacking. One thing is clear—this story is far from over, and the stakes couldn’t be higher for local government accountability.

Key Notes for Professionals

The STDC event is a cautionary tale for accounting and audit professionals. Here are some lessons worth noting: 

• Governance Is Non-Negotiable: Strong governance practices are the foundation of financial accountability. The Tees Valley Review’s findings highlight what happens when this foundation is shaky. 
• Deadlines Are Critical—But Not Absolute: While time constraints are real, auditors must prioritize thoroughness over expedience. A rushed audit can do more harm than good. 
• Transparency Builds Trust: In an era of heightened scrutiny, organizations must go the extra mile to assure taxpayers and stakeholders that public funds are being used effectively. 

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