Powys County Council will use more than £432,000 from its reserves to resolve an accounting issue before the 2025/26 financial year even begins.

At a meeting of the Liberal Democrat/Labour cabinet on Tuesday, March 25, senior councillors were presented with a report on problems identified last summer.

The issue concerns how staff costs in the housing department are allocated between budgets.

The Housing Revenue Account (HRA) funds the maintenance of council housing and new developments. However, certain services, such as homelessness support and housing allocations, are covered by the council’s general fund.

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

The review found that staff salaries had been “disproportionately biased” towards the HRA due to changes in housing service demands since 2022.

This means a £432,280 shortfall will need to be covered 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 added that the council now has greater clarity on these costs.

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

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

“Surely the reserves should have been specified so we can understand the impact of that. This problem was discussed last summer, and I’m shocked it was not possible to include in the budget proposals considered on February 20.

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

He added that, in the lead-up to the budget, he had “specifically asked” if there were any further issues or planned use of reserves that the panel needed to be aware of.

“And nothing was highlighted,” said Cllr Davies.

Director of corporate services and Section 151 officer, Jane Thomas, explained that finance staff had to work through the figures, and the “extent of the position” was not fully understood until “very recently.”

She stressed that when Cllr Davies raised questions during the budget process, the finance team was “not aware” that this issue would need to be factored into next year’s budget.

“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,” Ms Thomas said.

The cabinet went on to approve the funding request.

The blunder has prompted a question submitted to Cabinet by Cllr Iain McIntosh (Reform UK, Yscir with Honddu Isaf and Llanddew).

The question, submitted yesterday (Tuesday) reads: "The recent revelation that Powys County Council has had to draw from its reserves due to an accounting error is deeply concerning. This blunder, which has resulted in a significant financial shortfall, raises serious questions about the competence of the Labour and Liberal Democrat councillors currently running the council. Such mismanagement not only undermines public trust but also jeopardises essential services that rely on proper budgeting. The residents of Powys deserve accountable leadership that ensures fiscal responsibility and transparency.

“As it is imperative that this never happens again, can you confirm if those responsible are going to be held to account, and that measures are put in place to prevent such alarming mistakes in the future?”