One of the most ambitious experiments by the underground Dáil Éireann was their takeover of local government from the British LGB. In April 1919, W. T. Cosgrave was appointed Dáil minister for local government, with Kevin O'Higgins later taking up position as his assistant. The ministry was unable to achieve much until the 1920 local elections saw landslide victories for Sinn Féin candidates. In June 1920, while the local elections were still under way, the Dáil local government department issued instructions to all local bodies to pass resolutions declaring their allegiance to Dáil Éireann and refusal to communicate with the LGB. Most county councils in the southern 26 counties obliged. Following the elections, one of the key tasks for the department was maintaining and funding the infrastructure of local government while insisting on defiance of the LGB among local bodies. Despite the chaotic conditions of revolution, they were able to achieve this to a remarkable degree.

In July 1920, the British government decided to deal with the subversion of local bodies by withdrawing all grants and advances from any council that refused to obey its instructions to submit their books for audit. In another attempt to wrest control back from the separatists, claims for malicious injury (either by IRA or Crown forces) would be charged against the rates. The locally collected poor rate accounted for about 80 per cent of county council revenue in 1918 and 1919; the withdrawal of government grants therefore put extra pressure on the rates to pay for councils’ services and made vital the protection of these funds. In response, the Dáil devised a scheme that asked collectors to refuse to lodge rates collected with the LGB-sanctioned treasurer (usually a local bank) but instead with secret trustees (‘men of standing in the community and of unimpeachable character’). The money would be received from collectors, and later distributed, by a bonded ‘paymaster’. To remove them from their obligations to the LGB, collectors would resign only to be immediately reappointed by their councils.

This scheme was first launched by Clare County Council on its own initiative but was recommended for all other county councils ‘similarly situated’ by a Dáil commission of enquiry into local government in August 1920. With economy and prudent spending, councils could still realistically hope to operate on poor rate revenue alone.