Council tax payers in Cumbria could be facing a £10m bill in just two years if local councils do not clean up their act when it comes to recycling.
An as-yet-unpublished Audit Commission, report, seen by the BBC, said that too much household waste in the county was still going to landfill sites.
The government watchdog also found that sites were filling up fast and no alternative plan had been put in place.
If targets are not met by 2008 Cumbria County Council could face a £10m fine.
'A fair indication'
The local councils are responsible for recycling but the county council, as the lead authority, would be faced with the bill, which would have to be passed on to taxpayers.
Cumbria County Council said in a statement: "The Report was presented by the Audit Commission to the Cumbria Strategic Waste Partnership which is a collaborative working partnership between District and County Councils.
"It was accepted as a fair indication of the current situation.
"The partnership recognise fully the implications outlined in the report and the representative of the Audit Commission at the presentation welcomed the proposed actions by the partnership to mitigate against the impact of potential fines."