01 March 2002
The National Audit Office report on the Teesside Development Corporation (TDC) found that a catalogue of accounting misdemeanours - and the failure of government departments to react to them - meant that the scheme closed with a deficit of £23m in 1998. The auditor also said the figure could rise further as a residual body settles outstanding liabilities.
The TDC was one of 12 urban development bodies set up to regenerate areas that had suffered long-term decline, such as Teesside docks. It was wound up after 11 years, but MPs soon raised concerns over a string of financial difficulties.
On investigation, NAO chief Sir John Bourn found that the corporation had entered into a series of forward funding and deferred payment agreements with creditors that had not received the required approval of the Treasury or the then Department of the Environment.
Bourn also found that the corporation had breached government accounting practices by delaying other payments to creditors.
According to the report, the Department of the Environment was aware of the corporation's approach to its business activities and had been 'ineffectual in bringing about remedial action', despite considering intervention.
The NAO recommends that, in future, non-departmental boards should be balanced to reflect a range of business and financial expertise, and that government departments should provide 'sufficient checks and balances' to make for sound corporate governance and risk assessment.
PFmar2002
