More than £1.5m has slipped through Kirklees Council’s fingers ‘unnoticed’, as energy tariffs for some properties have not increased in more than a decade.
Earlier this year, the council’s Corporate Governance and Audit Committee were left ‘disturbed’, fearing the local authority was losing millions of pounds due to “inaction”. One of the problem areas was highlighted as the District Heating Network – the system used to heat some of the council’s housing stock.
This system sees the council manage a contract with an energy provider which provides a metering and billing service. Residents pre-pay for their energy consumption, with the provider collecting the cash and passing it onto the council. The council has responsibility for ensuring the correct tariffs are put on the metres, but this hasn’t gone to plan.
The local authority has failed to review the tariffs for around 1,042 residents – 90 per cent of whom are council tenants with the remainder being private owners – since 2013. A recent report blames this on the “absence of a contract manager and key personnel changes”. This failure has seen the residents underpaying for their energy, paying less than the wholesale gas price paid by the council.
Issues with the service were flagged up in an internal audit back in 2019 but had still yet to be addressed by the time another internal audit report was published this June. As a result, the Housing Revenue Account (HRA) – a separate pot of cash used to support council tenants – suffered a loss of £596k in 2023/24, and had a shortfall of around £1m in the year before that.
Adding further complication is the fact that the council needs to make new arrangements for an energy provider, as the current contract expired in January last year. Energy is still being supplied by the current provider as the council is in an exemption period, but this runs out in December.
The predicament had prompted members to request the attendance of officers from the Homes and Neighbourhoods department, and this took place at the latest meeting.
Speaking at the meeting, the Director for Homes and Neighbourhoods, Naz Parkar, admitted that the service hasn’t responded to the challenges “quickly enough” and had “lacked the appropriate governance and controls” in this area. He also set out some of the plans to remedy the situation including calculating and implementing the correct tariff charges and introducing a more robust governance structure.
Though Mr Parkar explained that he had not been party to the 2019 audit, he said: “Ultimately, I’m putting my hands up as the Director of this service now to say that I should’ve had my eye on this ball and reported it and I haven’t done until the June 2024 report.”
Members wanted to hear how the service had gotten into this position and Mr Parkar said: “It’s really difficult to try and get to the bottom of 11-years worth of not managing this contract in the way we should’ve done.” However, he continued to set out a number of challenges around leadership and changes in staff and capacity.
Councillor James Homewood felt that Mr Parkar’s explanation as to how the council had got into this position was ‘not good enough’.
He said, “How can I be assured that within Homes and Neighbourhoods, there isn’t more of these things sitting there that people don’t know about because we don’t seem to understand where the failure occurred initially.”
Chair of the meeting, Cllr John Taylor, added: “My worry on this is we can have a £1m loss to the HRA in a year and not notice. What reassurance does that give us as an audit committee that actually our accounts are well understood because surely we had an expectation of what our income would be in a year and what our costs would be in a year and they were £1m out and it wasn’t flagged.”
Mr Parkar explained that the service was aware of the situation, and that the senior management team had agreed some actions to address it in 2022 which should have been progressed. However, he said that staff changes and a lack of control and monitoring meant this hadn’t been the case, with the internal audit flagging the issues up once again in June 2024.
He added: “I’m not for a minute trying to make excuses for what has gone on – we should hold our hands up – we have taken our eye off that ball. To assure you, Cllr Homewood, that there aren’t other things lurking – we have now got much stronger control in governance within the homes and neighbourhoods service…”
As it stands, the council is still running at a loss when it comes to the District Heating arrangements, with residents underpaying by as much as £500 a year, the meeting heard, with this to continue until the correct charges are implemented. However, Mr Parkar explained that the council will not be charging residents retrospectively.
