Evidence that one in three councils make more by charging for some services has come under fire from accountants working in the public sector.
The Chartered Institute of Public Finance and Accounting (CIPFA) suggested the Audit Commission has called on the Government to set up an "independent grants commission" to help ease problems with local authority funding.
The chairman of a regulatory body overseeing the public purse has distanced himself from evidence showing some councils make more money by charging for additional services than council tax.
Audit Commission chairman Jeremy Newman said there was no "one-size-fits-all" formula for how councils decide which services they charge for.
A rise in the money generated by charging showed "the significant role" it was now playing in funding public services.
One in three councils made more money over the last year through parking charges and school meals than they did through council tax, a new study has shown.
Councils made £10.2 billion in 2011/12 by charging for rubbish, funerals and other domestic services, the Audit Commission found.
The commission, which looks after the public purse, found 32% of districts were collecting more money through additional services than they were through council tax.
One in five (21%) of London boroughs were among those councils which had brought in more revenue by charging for extras than council tax.
In response to the report into council fraud, a spokesman for the Department of Communities and Local Government said:
The report into fraud revealed fake housing and council tax benefit claims continue to account for the largest proportion of all council fraud losses - £119 million in the latest survey - however local government counter-fraud teams are spotting new risks.
These include a case uncovered by a council where housing tenants lied about their identities to increase the discount available to them under the Government's Right to Buy housing scheme.
Grants available to individuals, community groups and voluntary organisations have also been targeted by fraudsters making false applications, and evidence is also emerging of fraudulent misuse of business rate relief by companies.
The commission reported that schools are falling victim to internal and external frauds in recent years, including those involving expenses and the altering of cheques, as well as procurement and finance leases.
A new report has revealed details of the scale in which local governments have been targeted by fraud.
A spokesman for the Audit Commission added the report, called Protecting the Public Purse 2012 - Fighting Fraud Against Local Government, found the amount of fraud detected by councils was a comparatively small amount.
He said: "There has been an increase in the amount of fraud detected by councils, but the fraud detected is the tip of the iceberg."
Councils battling fraud are detecting "only the tip of the iceberg" as local government is targeted by new forms of deception, a report published today warns.
Research by the Audit Commission has found that while councils were more efficiently tackling long-established frauds, new scams were now emerging in areas such as business rates, Right to Buy housing schemes and at schools.
Between April 2011 and April 2012 councils in England uncovered a total of more than 124,000 cases of fraud adding up to £179 million.
That compares to the 121,000 cases, totalling £185 million, detected the previous year.
In a letter to all three main political parties, the leaders of every major council in England and Wales have urged that "real change" in elderly care is needed to avoid local government having to cut funding to things like parks and libraries.
The letter argues that failure to reform care for the elderly will result in local councils having to divert funding to "plug the gap".
The letter was drafted by chairman of the Local Government Association, Sir Merrick Cockell.
"For too long we have toyed with adult social care reform and failure to act now may be the failure that tips the system over”
“We cannot afford any further delays. We are clear that any such loss of momentum on exactly how care is funded is dangerous.”