The Auditor General for Wales has delivered a warning that should ring alarm bells in Cardiff Bay and every county hall across the country. At a time when councils are facing unprecedented financial pressures, the very system used to fund local government appears increasingly outdated, opaque and ill-suited to modern Wales.

For more than two decades, the Welsh Government has relied on a funding formula that has never been fully and independently reviewed. In those 20 years, Wales has changed dramatically. Councils have taken on new responsibilities, communities have evolved, demand for social care has soared, and public expectations have grown. Yet much of the machinery that determines how funding is distributed remains rooted in assumptions from another era.

That should concern every taxpayer.

Local authorities deliver many of the services people rely on most, from education and social care to roads, libraries and waste collection. They need certainty to plan ahead, invest in prevention and make sensible long-term decisions. Instead, councils are often forced into crisis management, waiting until late in the financial year to learn how much funding they will receive.

The Auditor General is right to highlight the consequences. When settlements arrive late, councils have less time to consult residents, consider alternatives and develop sustainable budgets. The danger is that short-term fixes become the norm. Services are trimmed, investment is delayed and opportunities to prevent future problems are missed.

Equally troubling is the continued use of data that, in some cases, is nearly a decade old. If funding is meant to reflect need, then it must be based on the realities facing communities today, not those of years gone by. Without regular review, confidence in the fairness of the system inevitably erodes.

The Welsh Government argues there is no clear consensus among councils on the need for a wholesale review. That is not a convincing reason for inaction. Leadership sometimes requires addressing weaknesses before they become crises.

Wales needs a funding system that is transparent, modern and trusted by those who depend upon it. The Auditor General has once again identified recurring problems. The real test now is whether ministers are prepared to act.

Because if councils cannot plan for the future, neither can the communities they serve.