It could take up to four years for Mid Devon District Council to rebuild a housing-related pot of money after it mistakenly both under- and overcharged council house tenants.
A total of £1.8 million could be needed to rectify the error that involved thousands of council tenants being charged incorrect amounts in rent.
An estimated 1,600 tenants have been undercharged, but the council is not legally allowed to claw this back, or instantly increase rents to the correct amount. This means residents who have been undercharged for years will remain on the low rate until they move.
Roughly 1,200 tenants were overcharged, and these residents will be reimbursed. A historical error in a spreadsheet meant that rent calculations for almost a decade were based on an incorrect formula.
The error was only identified last year when the council moved to a new auditor.
“Most councils’ housing-related finances are not in a particularly strong position, but ours is,” said Andrew Jarrett, the council’s deputy chief executive, told the council’s scrutiny committee this week.
“It is frustrating to have to reduce our balances for a few years, but I am confident we can build them back to the £2 million level in three to four years,” he said.
Mr Jarratt added that the spreadsheet error “predates everyone in this room”, and the council has now changed its processes to ensure at least three officers checked such formulas.
He also said the council has other housing-related reserves of more than £21 million, but these are classified as ‘earmarked’.
“We wouldn’t want to use these as they have already been allocated but they are there,” Mr Jarrett said.
“They show the financial health of the housing revenue account is still strong.”
The committee heard that the process of getting refunds to those tenants who had been overcharged isn’t straightforward.
The amount that each tenant had received in benefits is a factor in each individual case, so the council is working with the Department for Work and Pensions to ensure refunds are calculated accurately.
Furthermore, the council said it is working to identify vulnerable tenants, and support people who receive a large chunk of money in one go in case they have problems such as addictions. However the council cannot legally withhold money owed, but can suggest that payments be phased, or be used to offset future bills.
Mr Jarrett reiterated that the council had referred itself to the social housing ombudsman as soon as the error was identified last year, and that it is working hard to rectify the mistake.
“We take no comfort that there are a number of other councils and housing associations that have made very similar mistakes in the past,” he said.
“We have spoken to some of them and learned lessons to implement remedial actions.”