Conflict had "sapped the energy" of council staff, it was claimed today
The Welsh Assembly Government is to intervene in running a council after a watchdog's "unprecedented" criticism.
The Auditor General said Anglesey council has "serious persistent problems" which affect its working.
"Personality politics" based on mistrust and suspicion were partly to blame, while problems existed with both officials and political arrangements.
The council said it accepts the findings of the report and all seven recommendations for improvement.
"Serious, persistent problems at the Isle of Anglesey council urgently need addressing now if it is to restore its reputation, win back public trust and set a positive course for the future," said Auditor General, Jeremy Colman.
He said the council's "history" meant he was convinced the changes that were needed would not happen unless there was outside input.
Amend political arrangements within 12 months, setting clear priorities and direction
Restructure senior management within six months to address deficiencies with corporate leadership
Take immediate steps to restore trust between some members and some senior officers
Improve planning decisions within three months
Improve response to complaints
Improve citizen engagement by end 2009
Strengthen corporate services within six months
Source: Auditor General
"That is why I am calling on assembly government ministers to intervene and to provide the necessary external support and challenge that Anglesey council needs to help place it onto a firmer, more successful, footing," he said.
In his report Mr Colman said even though there are good features in performance of many services there are internal issues.
These include weak self-regulation, inappropriate behaviour and conflict.
The report said all these issues had been left largely unaddressed since the council was established in 1996 - despite a number of previous external reviews.
Mr Colman goes on to say there is a history of "personality politics" based around mistrust, suspicion and personal animosity.
Attempting to deal with the problems had used up "huge amounts of energy" and had distracted people, including successive managing directors, it said.
This meant the council had no real sense of direction, or strategy, for achieving savings at a time of increasing financial constraint.
It added that whilst the former managing director had made efforts to reduce conflict and improve behaviour, there had been no consistent corporate focus on addressing the issues.
By John Stevenson, BBC Wales political correspondent
This is the first report of its type in Wales. There are numerous examples of intervention in specific services, for instance recently in Swansea social services and involving Denbighshire education but this is the first time a report has dealt directly with the way a whole council is run by councillors and senior officers.
There has been a catalogue of critical reports since Anglesey council was established in 1996. The council has gone through a succession of chief executives and managing directors and has been racked by political instability.
As to what happens next, there could be a whole new team sent to run the place.
The local government minister has powers where he believes a local authority is failing taxpayers. In the absolute extreme the minister can chose to exercise a function of the authority himself, or he can appoint a nominee.
It is normal to give the authority the right to make representation but in an extreme case he has the power to make a decision without consultation.
The majority of councillors are well motivated in their approach to council business and it is important to recognise their contribution, the report notes.
But their efforts have not been enough to counteract poor behaviour by a small number of councillors.
Weak political group structures were also identified as contributing to a lack of control and sanction.
A culture was created which not only tolerates inappropriate behaviour, but is seen by some to reward it, it noted.
The council's acting managing director, Richard Parry Jones, described the report as "hard hitting" and a cause of concern for the authority.
"It is mainly to do with conflicts between a small group of elected members, but officers have been drawn in to that in the course of their duties," he told the Good Morning Wales programme on BBC Radio Wales.
"It's quite plainly obvious that the authority is now in the last chance saloon and if we don't pull together then the assembly government will have no option but to take away the authority of the council as it currently stands."
Mr Parry Jones said he welcomed the prospect of intervention from the assembly government, and the possible plan to appoint a board to oversee changes at the authority.
"I would agree that the council on its own has failed to address these problems over a long period of time.
"We do need external support - and that should be very robust.
"Unless there is a wake-up call and everyone involved with the council realises the gravity of the situation we are in, unless that happens, and unless there is a change of culture and ethos then I would not be surprised if the minister took even firmer action."
The acting managing director said he believed the council could begin to implement successful changes.
But he added: "At the end of the day we all have to realise that we are here to serve the community.
"Being involved in conflict management takes people like myself away from what we should be doing, concentrating on services, and in fact planning for the future.
"The Isle of Anglesey has some serious problems economically, socially, and culturally that we have to face.
"Not least of those will be cuts in budgets in the next two or three years which will have a profound effect on schools, social services and other key sections."
A special meeting of the full council will be held on 20 July, to discuss the report and consider its recommendations and agree a way forward.
Local government minister Dr Brian Gibbons told assembly members he welcomed the report but very much regretted its findings, saying it was "unprecedented" in the nature of its criticism of the council.
He promised intervention action.
Dr Gibbons said: "The prospects for delivering improved services for the future are far from positive particularly in the challenging financial times we have ahead of us and the particular challenges that the island of Anglesey faces."
He continued: "Without a major change there is a real possibility of a drop in standards and at worst, service failures.
"The Auditor General recognises that this position is unsustainable and has recommended that the Assembly Government uses its statutory powers to intervene in the running of the Council. l agree and will do so."
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