Council to pull £432k from reserves

An accounting blunder means council has to dip into reserves - before the financial year even begins!

Even before the start of the 2025/2026 financial year Powys County Council is having to dip into its rainy day reserve funds to find just over £432,000 to deal with an accounting issue.

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At a meeting of Powys County Council’s Liberal Democrat/Labour cabinet on Tuesday, March 25 senior councillors received a report on problems that had been found last summer.

They concern which part of the council budget pays for parts of the work done by staff in the housing department.

The Housing Revenue Account (HRA) is used cover the cost of with funding the maintenance of housing stock and building new homes – but some aspects of the work – such as on homelessness and housing allocations are paid from council budget general fund.

Deputy council leader and cabinet member for housing Labour’s Cllr Matthew Dorrance (Brecon West) said: “We were alerted to potential conflict between the HRA, and the general fund and a review was undertaken in July 2024.”

The review found that the salaries were “disproportionately biased” towards the HRA.

This was due to changes in the demands on housing services that have occurred since 2022.

The council produced several options on how to deal with the issue.

Cllr Dorrance said the preferred option is to: “re-profile the service and funding.”

This  means that £432,280 shortfall needs to come from reserves in next year’s budget,

Cllr Dorrance said: “The way these things operate has changed and there has been a sharp increase in homelessness.”

He said the council has “never had the clarity before that we do now” on these costs.

Chairman of the Finance Panel, Conservative group leader, Cllr Aled Davies (Llanrhaeadr-ym-Mochnant & Llansilin) told cabinet that his committee had not had the opportunity to scrutinise this issue.

Cllr Davies said: “I find it quite shocking that a few short weeks after the budget was set that we see £432,000 will have to be found from unspecified reserves.

“Surely the reserves should have been specified so that we can understand the impact of that.

“The problem was discussed last summer, and I’m shocked it was not possible to include in the budget proposals that were considered on February 20.

“It’s not acceptable that this should happen even before the financial year has started.”

He added that in the run up to the budget he had “specifically asked” if there were any further issues or use of reserves to take place that the panel needed to know about.

“And nothing was highlighted,” said Cllr Davies

Director of corporate services and s151 officer Jane Thomas explained that finance staff had to work through the figures .

The “extent of the position” was not fully known until “very recently” stressed Ms Thomas.

She said that when Cllr Davies had asked questions on the budget the finance team were “not aware” that this issue would need to be put into next year’s budget.

Ms Thomas said: “It does highlight the assurance that we all have about the attribution of cost and I’m very keen they are kept under constant review.”

Cabinet went on to agree the funding request.