Sustained funding cuts on councils across Wales are impacting on their ability to deliver key services to the public, a report by the Wales Audit Office has said.
The report said that while financial planning in councils is strengthening, there is scope to improve how savings are identified and delivered.
Some of Wales’ 22 local authorities are facing a challenge to stay within budget.
The report says: “Whilst there is a robust financial framework in place that effectively prevents local authorities becoming insolvent, the impact on services caused by funding reductions is more difficult to discern.
“Oversight by the Welsh Government appears robust in preventing financial failure but it is weaker at highlighting the extent of financial pressure within authorities.”
Auditor General for Wales, Huw Vaughan Thomas said: “Councils in Wales are facing significant financial challenges.
“The continued impact of austerity and reductions in public monies, coupled with the unclear implications of ‘Brexit’, require councils to continue to cope with uncertainties.
“Whilst I am pleased to see councils making progress in strengthening their financial planning, they need to do more in response to the challenging environment and our recommendations to both authorities and Welsh Government will help councils move forward and ensure that services are run as efficiently as possible.”
The report recommends that councils develop corporate-wide “income generation and charging policies” and ensure they have comprehensive reserve strategies.