Angus Council has been warned it needs to make “unprecedented” changes to achieve a financially sustainable position.
Audit Scotland has told the local authority its plans show a “considerable budget gap” to be addressed beyond this financial year.
Council leader Bob Myles said he and colleagues were aware they faced major challenges and warned difficult decisions lay ahead.
The auditor noted the council used £2 million of reserves to balance the books this year but cautioned such moves in the future would not be sustainable.
The council’s medium-term budget strategy anticipates a funding gap of £38.4m over three years from 2018/19 to 2020/21.
The Audit Scotland report states: “The depth of change required to achieve a sustainable financial position is unprecedented in the council.
“Members must demonstrate that, to remain within the funding available, decisions are being taken on service redesign and delivery, which will require transformational change.”
Angus Council was praised for the progress it had made with its change programme so far.
The review of the council’s accounts noted that in 2016/17 directorate budgets were reduced by £8.3m and a further £1.8m efficiency savings were anticipated from the Transforming Angus change programme.
The report added: “The council has made good progress in revising its strategic plans to align its strategic priorities and budget strategy with its longer term community planning outcomes, to ensure that its programme of transformational change delivers the required significant savings and manages the impact on service users.”
However, the challenges to continue to balance a budget in the coming years were clearly spelled out.
The report continued: “The council held a minimum contingency level of reserves in 2016/17 in line with policy.
“Almost all of the remaining reserves are committed for specific purposes, including planned use of over £2 million of reserves to achieve financial balance in 2017/18.
“Ongoing use of reserves to achieve a balanced budget will not be sustainable.
“The council has a medium-term financial plan that is aligned to the council priorities and demonstrates how it will address future budget challenges. A long term financial plan is being developed.
“The council’s financial plans demonstrate a considerable budget gap to be addressed beyond 2017/18.
“Service redesign and transformation through the change programme is intended to achieve most of these savings but not all of the required savings have been identified yet.”
Audit Scotland also noted that the council had a good track record of delivering services within budgets over the last six years and that there were no significant weaknesses found within the local authority’s financial control systems.
Leader of Angus Council Bob Myles said: “We are all too acutely aware of the financial challenges that face the council as a result of ever-reducing funding from Government.
“Despite these budgetary pressures, we continue to provide high quality services and have made significant improvements in our educational attainment rates, our recycling and in building new affordable homes. We have undertaken a great deal of work as we strive to achieve better outcomes in the future for the people and communities of Angus and by 2020 we will be a better, stronger, more sustainable and smaller organisation.
“Difficult decisions undoubtedly lie ahead. All our elected members are going to have to make these difficult decisions to make, but make them we will”.