Councils must “radically” change how they operate if they are to cope with budget cuts and still deliver services.
The Accounts Commission has told local authorities they need to work in partnership with other councils and agencies to make the most effective use of their funds.
It said without significant change services will become even worse.
This year, the council faced a £14.7 million budget deficit and it is predicted that could rise again in 2024 with reportedly another £11 million gap.
The financial outlook was not looking good with the report warning: “Costs are going up and the amount of money councils receive to run services is set to get less.”
The report on Local Government in Scotland found the covid pandemic has affected services.
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In particular, it stated four were at risk of declining.
In adult social care, the Commission found: “There are signs that the sector is in crisis, with growing backlogs, declining satisfaction and no clear picture of demand or unmet need.”
On homelessness, it said: “During the first year of the pandemic homelessness fell as a result of extra emergency protections but it is rising again.”
For environmental services, it said: “Performance declined during the pandemic, including a drop in recycling rates and street cleanliness levels.”
It also said culture and leisure services were “severely affected by the pandemic and future risks are significant”.
Few councils it said provide services jointly with other areas and they must “rethink” how they work together if they are to tackle national issues like climate change, child poverty and inequalities.
Tim McKay, acting chair of the Accounts Commission, said: “The New Deal for local government, agreed between the Scottish Government and COSLA, is long overdue.
“Putting this in place will give councils longer-term financial stability, supporting them to make decisions and make the fundamental changes that are urgently needed.
“Councils have gone beyond the point where making savings is enough.
“If the change needed doesn’t happen now, some services will continue to get worse or deeper cuts will be made.
“This will impact communities and individuals that are already at crisis point with the effects of inequality and persistently high poverty.
“Councils need to have open and honest conversations with their communities and staff about the future of council services."
It highlighted an issue raised by many councils during the latest budget-setting process.
The Commission said: “Currently, an increasing proportion of funding is ringfenced for national priorities; this constrains councils from making decisions about how to best use the money to address the local needs of their citizens and communities.”
Shona Morisson, president of Cosla, the local Government body, said: “The report also recognises the huge challenges Councils face due to budget constraints, increased cost pressures and demand, and increases in directed and ringfenced funding.
"As we have all seen, increasingly difficult choices are required about spending priorities and service provision given reducing budgets coupled with growing demographic and workforce pressures.”
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