Councils in Wales are not given enough clarity or certainty over the funding they receive.
That is the finding of a new report from the Auditor General for Wales on how the Welsh Government allocates funding to local authorities.
The report calls for funding decisions to be made earlier and based on up-to-date evidence.
It examined the way the Welsh Government distributes money to the country’s 22 principal councils, which rely on this funding to deliver essential public services.
Auditor General Adrian Crompton said: "Many of the findings in this report reflect reoccurring themes I have seen throughout my time as Auditor General.
"This report finds that the way the Welsh Government funds councils does not always help them to achieve value for money – particularly over the longer term.
"Addressing these themes is essential if the Welsh Government and local authorities are to navigate today’s extreme financial and demand challenges and deliver sustainable public services to the people of Wales."
The report found that councils need clearer and earlier estimates of future funding levels to support effective financial planning.
It also recommended that both councils and the government plan for a range of potential funding scenarios, so they can respond more effectively once final allocations are confirmed.
The main funding formula used by the Welsh Government has not been fully and independently reviewed in more than 20 years.
Some of the data used in the formula dates back to 1991 and 2001, despite significant economic and demographic changes across Wales since then.
The report also highlighted issues with grant funding, including the design, number and timing of grants.
Councils are sometimes notified of funding late in the financial year, increasing the risk of rushed decisions and reducing the potential for strategic investment in services.
It set out five recommendations for the Welsh Government, including reviewing the funding allocation process, providing greater certainty to councils about future funding, and improving the way grants are issued.
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