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Some NIS 300 million in extra funding for cash-strapped local authorities was approved by the Finance Ministry two months ago, but has disappeared into the Interior Ministry instead of being passed on to the towns in question, treasury officials charged yesterday.

They were responding to a two-day strike that some 240 local authorities had called for yesterday to protest what they said was a treasury decision to slash their "balancing grants" - money the government gives struggling local authorities to help them balance their budgets - by 30 percent.

Two months ago, a funding dispute between the Union of Local Authorities and the government ended with an agreement that the treasury would transfer an extra NIS 420 million to towns in economic straits via the Interior Ministry. That would raise the total of this year's balancing grants to NIS 2.4 billion, similar to the level in 2007.

The towns claim they never got this money; hence yesterday's strike. But the Finance Ministry insisted yesterday that it transferred all the promised funds, and pointed the finger at the Interior Ministry, which has been sitting on NIS 300 million instead of passing it on. Their efforts to find out what happened to this money have met a blank wall, treasury officials added, prompting budgets director Udi Nissan to send an angry letter to Interior Ministry Director General Gabi Maimon last week protesting this lack of transparency.

The treasury therefore announced that neither its representatives nor those of the Prime Minister's Office will meet with Interior Ministry officials to discuss a resolution of the current crisis until they receive a detailed accounting of what happened to the missing NIS 300 million.

Finance officials blamed Interior Minister Eli Yishai and Maimon for the shortfall, adding that they feared Yishai, in collaboration with UAL chairman Shlomo Buhbut, had in fact allocated the funds, but according to his own priorities rather than on a strict basis of need. The main victims, they said, have been small towns that are not politically well connected. Some of these towns say the balancing grants they have received are 50 to 70 percent lower than what they were promised.

The remaining NIS 120 million, the treasury said, has been frozen by Knesset Finance Committee chairman Moshe Gafni until the Interior Ministry gives the panel clear criteria on how the money will be allocated and a list of how much money each town will get.

Yishai's spokesman, Ro'i Lachmanovich, termed the Finance Ministry' s accusations "unworthy of response."

"Those making such claims ought to lend a hand to the local authorities' battle for existence instead of lending a hand to throwing sand [in people's eyes] to win media points," he said. "All money transferred by the treasury is transferred to the local authorities."

As for the strike itself, it proved decidedly spotty. According to the Education Ministry, kindergartens and schools were closed in only 27 percent of localities, and only 19 percent of schoolchildren were affected; it said it expected today's figures to be similar. But Buhbut said there was never any intention of closing the schools.

Garbage collection took place as usual in some towns, while in others, sanitation workers followed a reduced Sabbath schedule. Overall, many municipal services functioned normally, though some municipal departments refused to receive the public.

Buhbut blasted 15 wealthy cities that need no balancing grants for their refusal to participate in the strike, thereby weakening its effect.

In Be'er Sheva and Rahat, fire stations were closed yesterday as firemen protested the police's detention of seven of their number, who were en route to Jerusalem to attend an unrelated demonstration by the National Fire Fighters Association to protest budget cutbacks and staff shortages in the Fire Service. Police said the seven were detained for two hours because they blocked a major intersection.

This morning, heavy traffic jams are expected at 10 major intersections nationwide as convoys of garbage trucks make their slow way to Jerusalem as part of the local authorities' protest. And the towns are planning an open-ended strike in October, after the Jewish holidays, if their financial woes have not been solved by then.