Funding paid out by the Government to the areas worst hit by the summer floods was badly targeted, inconsistent and will cover only half of local costs, the public spending watchdog says.

In a damning report, the Audit Commission says that four different funds were set up to pay for rescue services and the costs of water damage but the Government had so far pledged to meet only £60 million out of an estimated overall bill of £250 million.

It says that even if local councils recouped more of their costs from Government departments and insurers, they might have to cut services and put up council tax. Hull Council alone is drawing up a claim for £103 million for the cost incurred when floods hit the city twice in June.

The picture of chaos and confusion as councils try to patch up homes and schools contrasts with the earlier claims that the crisis was handled well by Gordon Brown in the weeks after he became Prime Minister.

With children still being taught in mobile classrooms and residents reduced to living in caravans, authorities are only just coming to terms with the size of the repair bills coming in.

So far town halls have submitted £29 million in insurance claims and requested £113 million from the Government to help repair roads, schools and care homes. But councils claim that the steps to apply for public money are surrounded by so much red tape that they have no idea how much cash they will get.

Several authorities have not taken out enough insurance to cover their expenses or are having to pay out huge excesses. Often the excess payments, running into tens of thousands of pounds, are more than the cost of repairing the damage, says the document.

The commission’s report, based on studies of the 18 worst-affected councils, says that some town halls are having to pay 3 per cent of costs with others having to find 73 per cent, because of differences in the amount of government funding they are eligible for and assessments by insurers.

In Hull, the estimated net cost per household willl be £326 compared with £1 in Cherwell, Oxfordshire, the Audit Commission said. Nearly 70 per cent of the total cost of the floods which damaged thousands of homes in June and July has been incurred by only four authorities – Hull, East Riding, Gloucestershire and Sheffield. “This is a tale of two floods,” said Steve Bundred, the Commission’s chief executive. “There are some local authorities which, although badly hit by flooding, will bounce back quickly. Others will be dealing with the effects of flooding for some time to come.”

The Department for Children, Schools and Families has allocated about £13 million for school repairs, mobile classrooms and extra schools assistance while the Department for Communities and Local Government has allocated £17 million in Flood Recovery Grants. Some £16 million has been allocated for Highways maintenance and £11 million from regional development agencies.

The DCLG is also expected to reimburse £20 million for emergency costs including sandbanks, heating, evacuation centres and food which were incurred in the days following the floods. But the so-called Bellwin scheme does not cover items which should be insured or capital costs to repair or rebuild schools, care homes and roads.

The Department of Transport has pledged £50 million to mend roads affected by the floods although the actual cost may be nearer £70 million.

A spokeswoman for the Audit Commission calculated that councils would still face a shortfall of £87 million in expenses once insurance claims had been settled.

Mr Bundred said that councils could not insure for every eventuality and the Government should take a greater share of the risk. He said: “Our report shows that the current government scheme to provide emergency assistance isn’t enough to deal with catastrophic events and should be reviewed.” Carl Minns, the leader of Hull Council, said that the authority had calculated it would need £100 million in capital costs to repair schools and roads and a further £3 million in lost revenue. More than 8,600 households were affected by the floods and 2,300 people were forced to live in temporary accommodation. Only eight out of the 99 schools in the city were unaffected. Mr Minns added that the council had received only £5million in grants so far.

Alistair Burt, the shadow minister for local government, said that the report exposed a catalogue of failings and that there was “no clear action plan to preempt another emergency”.

John Healey, the Local Government Minister, said: “I make no apologies for acting swiftly and decisively. We took unprecedented steps to reflect the unprecedented scale of the floods.”

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