Councils in Wales have been able to meet the financial challenges so far - despite considerable pressures - but the cracks are beginning to show.
The Auditor General for Wales says many do not have clear and realistic plans in place to deliver efficiency savings, councils are not basing their plans on sound and appropriate financial information and not all councils are effectively monitoring progress in delivering their plans.
The report Meeting the Financial Challenges Facing Local Government in Wales recommends councils should explore more opportunities to work together and with other public services, to reduce costs and deliver improved outcomes for citizens.
A report into governance failings at Caerphilly County Borough Council says things have improved but more work needs to be done.
The council says it welcomes the findings by the Auditor General for Wales and will act on its recommendations.
The report points to a number of factors that led to failings claiming the appointment of a new chief executive in 2010 led to "a greater appetite for risk and pressure". There were also weaknesses in the way business cases were prepared and in the transparency of reports.
Governance failings at the council were caused by a combination of weaknesses and, while the authority is improving now, it is too early to tell if this progress can be sustained is the conclusion of the special inspection report published today.
The report makes 8 recommendations for improvement, including calls for the council to:
Clarify in an understandable way, the governance and decision-making roles of - the Cabinet; Chief Executive; Corporate Management team; Corporate Directors; scrutiny committees and Audit Committee.
Ensure that it maintains appropriate documents of all decisions made and by whom, to provide assurance that decisions made are appropriate and transparent and strengthen risk management processes.