Despite the improvement, challenges including the phased introduction of earlier reporting deadlines, continued austerity and changing models of service delivery will all have an impact on the quality and management of accounting arrangements across the local authorities, the auditor general warned.

Financial pressures and changes to service delivery models are leading to an increased emphasis on collaboration, the report found. The report highlighted difficulties associated with accounting for collaboration and the impact this has on producing good quality accounts. Continued austerity measures may also lead to a reduction in the capacity of finance teams, it found.

The auditor general Huw Vaughan-Thomas said local government bodies needed to critically appraise their holding and use of reserves and ensure they are factored into financial and service delivery plans in a manner that allows them to live within their ‘future financial means’.

He added the changing timetable of account deadlines between now and 2020-21 will present challenges for both local government bodies and their auditors. Earlier closure of financial statements would be beneficial, he said.

Vaughan-Thomas said: ‘It’s good to see that local authorities are getting better at producing their financial statements – and on time.’

‘But, there are still issues that need addressing and I hope that this report will encourage further improvement, particularly at a time when services and reporting deadlines are becoming more demanding.’

The Auditor General for Wales' report is here.