Rates arrears of £130m accrued because an expensive computer system is not up to the job, the Northern Ireland Audit Office has revealed.
The Rate Collection Agency's £10.5m system was last year unable to send out final notices, the auditors found.
Landlords received prompt-payment discounts totalling £5m, whether or not they had paid on time.
The Department of Finance said major moves had been taken to address the problem and the debt was down to £85m.
One of the many problems found by the Audit Office was an incident where the computer calculated Disabled Persons Allowance of £2.9m for a single ratepayer.
The error was only detected and payment stopped as part of a manual supervisory check.
Less significant errors could go unnoticed by manual checks, the report said.
Auditors said record-keeping was so poor, the existence or accuracy of some figures could not be verified.
Introduced in October 2006, the Abbacus IT system was aimed at improving rate collection and housing benefit payment.
Inadequacies in the original specifications were blamed in part and an additional sum of more than £1m has already been paid to the installers for improvements.
Auditor General John Dowdall said: "Some basic functionality of the new IT system has not been adequate to meet the operational needs of the Agency."
He said: "One of the deficiencies in the original financial specification is the inability of the system to provide an analysis of account balances such as arrears distinguished between domestic and non-domestic property."
Arrears rose from £35m at March 2005, to £48m the next year and jumped to £88m by March 2007, said the report.
By March this year, the auditors found, this figure had risen to £130m.
The new system began operating last October, but it did not have the ability to issue final notices or process debt proceedings.
This meant that no computer-generated recovery action was taken between June 2006 and September 2007.
The report said: "This resulted in a fall in rate collection from 96.19% in 2005-06 to 91.7% in 2006-07 - compared with a key ministerial target of 98% for both years - and a rise in rate arrears to £88m in the same years."