Almost £40,000 of housing money to help residents in an area of Cumbria is being given back to the government.
Barrow Borough Council said demand for Discretionary Housing Payments (DHPs) had not been great enough.
However, the opposition Conservative leader, councillor Hazel Edwards, accused the authority of failing to let the vulnerable know about the money.
The council denied this and said it publicised the grant through job and citizens' advice centres.
DHPs are given to councils each year by the Department for Work and Pensions.
Ms Edwards added: "Discretionary housing benefit is another source of assistance offered to the most vulnerable by the government and it is essential that this council ensures it is fully used and distributed to those most in need, otherwise the residue is returned to the government and we receive reduced funding the following year.
"This is clearly a failure by the council in promoting this facility to those in need, when our government are providing substantial funds."
Barrow Council and Labour group leader Ann Thomson said: "DHPs are awarded through an application process and are widely promoted by the council directly, both generally where we believe there may be eligibility and through targeted campaigns.
"In some years, based on demand, there will be a surplus which is returned to government."
She also said the grant's availability was promoted through Women's Community Matters and Age UK.
The government allocated Barrow Council £148,902, housing money of which £111,094 was paid out.
This is an uptake of 74% meaning £37,808 is being returned, the Local Democracy Reporting Service said.