Auditors have questioned the sustainability of local authorities in Wales despite the improved financial position councils have experienced as a result of pandemic support.
The Welsh government allocated £660m additional funding to help councils cover their loss in income and their extra expenditure over 2020-21.
According to Audit Wales, this extra short-term funding improved councils' financial positions, mitigated the costs of COVID-19 and generally meant local authorities were able to avoid relying on reserves to balance their 2020-21 budgets.
However, prior to the pandemic councils were facing a financial squeeze and the auditors warned that the 22 Welsh local authorities faced uncertainty over future funding levels.
Councils have partly offset the 17% fall in core funding from the Welsh government over the past decade by a 35% increase in money raised through council tax, but overall local authority spending fell by 8% in the last 10 years.
Audit Wales warned that the demand for services was rising, concluding that councils would struggle to manage these pressures while also recovering from the pandemic and responding to the global challenge of climate change.
Auditor General Adrian Crompton said: ‘The pandemic has highlighted the importance of local government services and local government plays a key part in the recovery of the pandemic.'
