Lily's prayers were answered last week when she found a house to rent for herself and her two children in Bandon, Co Cork. Until then, home for the Nigerian asylum-seeking family was a hotel on the outskirts of Glengarriff village on the Beara peninsula, two and a half hours by bus from Cork city.

Lily says she was depressed living in the Golf Links Hotel, a mustard-coloured building about a mile outside the village which has a drab out-of-season air about it.

From the road, the hotel looks much like any other. Only the lack of parked cars and a clothes-line hanging in a glazed conservatory signal that it is no longer used as a tourist facility.

Today its guests are not travellers lured by the scenic charms of west Cork, but asylum-seekers from a variety of countries dispersed from Dublin to ease accommodation pressure in the capital. They receive three meals a day and have laundry services provided.

Because such basic needs are met, their cash supports are reduced. They currently receive weekly "comfort money" of £15 per adult and £7.50 per child, although it is expected that this will be increased slightly in the coming months. They are also entitled to child benefit, free medical, optical and dental treatment and payments for goods like prams or winter clothes.

Until this system of "direct provision" was introduced about a year ago, all asylum-seekers received the Weekly Supplementary Welfare Allowance of £84 and a rent supplement for private accommodation.

Now new arrivals automatically go into direct provision outside Dublin, unless they have medical or other grounds for being exempted. They are not allowed to work while their applications to remain in the State as refugees are being processed. The switch to a largely non-cash support system in the face of unprecedented increases in asylum claims coincided with a similar move in the UK. The authorities reasoned that the Republic shares a common travel area with the UK and that a more generous welfare system for asylum-seekers in the State would be a "pull factor" for claimants.

Lily was able to move out of direct provision and into the mainstream social welfare system on humanitarian grounds, including the strains of communal living on her and her sons, aged two and one.

"Life is good and bad here," she says, while her boys, Jonathan and Jacob, play cheerfully at her feet. "What is good is that Ireland allows refugees to come and stay, and looks after them. Where life is bad is a lot - people want their freedom to be able to go out and find a local shop . . . You can't put people in the countryside where there are not shops. Countryside is good when there are good things."

The Golf Links Hotel is one of 72 full-board centres for asylum-seekers in villages and towns around the Republic, from the tip of Co Donegal to the tip of south Kerry. They include B&Bs, hostels, disused army barracks, purpose-built mobile home sites and a former holiday camp at Mosney, Co Meath.

Refugee lobby and support groups say they favour dispersing asylum-seekers outside Dublin and welcome the efforts in the past year of civil servants, local authorities and other service providers as well as host communities. But most are severely critical of the entire concept of direct provision, which they say often leaves asylum-seekers bored, isolated, socially excluded, impoverished, deprived of services, unaware of their entitlements, demoralised, de-skilled and institutionalised. Despite significant increases in the numbers of staff handling asylum claims to meet the targeted six-month processing time, applicants can still wait for years to hear whether they can remain as refugees or not.

"It's not that they are not being well-fed and cared for," says Miriam Brennan, a social worker in Sligo who works with the town's population of around 30 asylum-seekers. "They are sitting around all day and they can't work or participate in community employment schemes, and there's a kind of lethargy or low-level depression in some of them. They don't know what's happening, when they can expect to hear from Dublin and, while they are waiting, they don't have the energy to do anything."

Piaras McEinri, of the Irish Centre for Migration Studies in Cork, says the authorities have decentralised asylum-seekers, but have not adequately decentralised services and support structures.

"The health boards vary considerably in their sensitivity to the specific needs of asylum-seekers and refugees and in their willingness to provide appropriate services," he says. "Even insofar as services are provided, there is sometimes a tendency to say: `They are in Ireland now and of course they are entitled to such and such, but they must comply with the way we do things.' Yet the title of the first inter-departmental report more than a year ago on these matters was `Integration - A Two-Way Process'. That's not happening on the ground."

The recently renamed Reception and Integration Agency is an inter-departmental organisation responsible for co-ordinating the dispersal of asylum-seekers.

Its director, Noel Waters acknowledges that the agency, formerly the Directorate for Asylum Support Services, cannot operate on a "remote control basis" from Dublin. He anticipates opening pilot satellite offices next autumn to co-ordinate service provision at regional level.

He says his staff are facing a daily challenge in securing sufficient accommodation for new asylum applicants and monitoring and maintaining standards. "We can never look beyond a period of about two weeks and say we have adequate accommodation," he explains. "In the back of our minds, we know we could have a surge in numbers . . . There was no manual here for this type of thing. We are writing the manual."

Waters says the agency is trying to introduce "a customer-service ethos" and has begun consultations with asylum-seekers to see how things can be improved.

An inspectorate makes daily unannounced visits to accommodation centres and, as a result, about 10 of these have been closed due to concerns about standards, which are rigorous, Waters says.

He does not believe asylum-seekers in direct provision are becoming institutionalised. He says specific personal problems are addressed as they arise and he also pays tribute to the efforts of local communities in welcoming asylum-seekers and overcoming initial fears.

Those fears led to pickets on premises and outpourings of anger at scores of public meetings in towns and villages last spring when locals learned, often at short notice, that they were to host asylum-seekers. Nasc, the Irish Immigrant Support Centre in Cork city, is one of many community projects to spring up in the past year to plug gaps in State provision. Workers at the centre, in an annex to St Marie's of the Isle Convent, offer from computer training, English classes, welfare and legal advice, and help in finding accommodation for those who are allowed to leave direct provision.

Nasc's co-ordinator, Brendan Hennessy, says organisations like his (Nasc is Irish for "link"), "by helping people on a day-to-day basis, could find themselves upholding a system that they fundamentally disagree with if they don't continue to challenge it at a wider level".

He says asylum-seekers should automatically be allowed to move out of direct provision after three months. "Direct provision prevents interaction between members of host communities and the asylum-seekers . . . Rumours and myths have built up around the hotels and people are being polarised," he says.