North East council to set up independent improvement advisory board, close development company

Middlesbrough Council is to form an Independent Improvement Advisory Board - made up of external and experienced senior officers and politicians - after further concerns were raised by auditor EY, in particular about cultural transformation and financial recovery and resilience.

The council is also in the process of closing the Middlesbrough Development Company (MDC) and has been told in a report from EY partner Stephen Reid that it should satisfy itself the company is delivering value for money during its close down period, and develop an action plan for how the council will realise the value the company has created.

EY last month made 11 statutory recommendations to the council after it found progress against failings identified last year but also “significant cultural and governance weaknesses” with insufficient progress on addressing these.

Elected mayor Chris Cooke said: “Having been in the job for four months, I’m now confident we’re in a position to tackle these issues once and for all.

“It’s clear in the auditor’s report that not enough progress has been made in responding to their serious concerns.”

Reid’s report explained that MDC - which is a separate entity from the town’s development corporation - was formed in February 2019 to deliver new homes but had its remit expand to large regeneration projects.

It is overseeing two large capital projects, the development of Boho Village and the redevelopment of the former Tollesby Shops site, along with some smaller works.

He noted internal auditors in January 2023 “raised some significant concerns over the council’s oversight and governance of [MDC]”.

These included lack of clarity over the roles and responsibilities of officers and members, the composition and training of board members and documentation of their meetings.

Middlesbrough decided in January 2023 to wind up MDC after internal audit found potential conflicts of interest and that some operations did not reflect local authority regulations – such as procurement, risk, performance management and project management.

Auditors noted Middlesbrough had provided £11.9m in funding to MDC and the estimated lifetime budget of its projects was £13.3m.

Reid said the council’s assessment that “a significant investment of time and money” would be required to meet the standards of governance recommended by the Chartered Institute of Public Finance and Accountancy was “indicative that the council did not have proper arrangements in place to oversee the activities of its subsidiary and ensure [it] delivers value for money with the resources provided to it by the council”.

Mark Smulian