Spending cuts alone cannot address the scale of the challenges faced by Scotland's local authorities, a report from the public spending watchdog has warned.

The Accounts Commission found that councils have coped "well" under a climate of austerity but face increasingly difficult decisions as they work to make ends meet.

It said the local government funding settlement has "significantly increased" the scale of the challenge in 2016/17 and beyond and has "substantial implications for services to the public, councillors and the local government workforce".

Cost pressures and increasing demands on services mean councils "face increasingly difficult decisions about how best to spend their reducing budgets", the report found.

It has made a series of recommendations around issues such as long-term financial planning and delivering services differently.

Commission chair Douglas Sinclair said there has been a dependency on incremental changes to services, increasing charges and reducing staff numbers in order to make savings.

"But these are neither sufficient nor sustainable solutions set against the scale of the challenge facing councils," he wrote.

"Cuts can only be part of the solution. What is required is a more strategic approach, longer-term planning and a greater openness to alternative forms of service delivery."

The commission's annual overview of local government states that councils' revenue funding from the Scottish Government will reduce by 5% in the next financial year, bringing the real terms reduction in revenue funding since 2010/11 to 11% - at a time when they face additional financial pressures and greater demands on services.

The Scottish Government disputes the figures and puts the revenue and real terms reductions at 4.6% and 8.3% respectively.

Councils' debt has also been increasing since 2011/12, the report said, with many predicting gaps between their income and spending in future years - something the commission warned may threaten their financial sustainability.

The report states: "Councils need to be more ambitious in their plans, better at longer-term planning, and willing to appraise all practical options for delivering services more efficiently and effectively. This includes empowering and supporting local communities in delivering local services."

The Accounts Commission also warned that - in light of past and planned staff cuts - councils must ensure they have people with the knowledge, skills and time to develop and deliver effective services in future.

A Scottish Government spokesman said: "The actual figures, taking into account the addition of the £250m to support the integration of health and social care, show that next year's reduction in local authority overall estimated expenditure is less than one per cent."

The spokesman added that the council tax freeze has been fully funded, with independent analysis finding that the freeze has actually been "over-funded" by ministers.

Kevin Keenan, finance spokesman for council body Cosla, said: "It is all well and good saying that councils need to be more innovative. It is quite a different proposition when they are faced with increasing central direction over how they deliver services which focus on inputs, rather than outcomes for our communities."