Auditors have warned that Falkirk Council is facing an "unprecedented financial challenge" that mean it is "inconceivable that service reductions will be avoided".
The council is facing a budget gap of £69 million over the next four years and in its annual audit report, auditors Ernst & Young flagged the council's financial sustainability as "red" due to the risk of not managing to close that gap.
The auditors told members that was partly because in the past members of Falkirk Council have not "made difficult choices", but have instead often used the council's reserves to keep services running.
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On top of that known budget gap, however, are external factors including rising inflation and the cost of borrowing that are creating risk and uncertainty.
The auditors look at four key areas: financial management, financial sustainability, governance and transparency and value for money.
The report stated that the council "continues to demonstrate good financial management arrangements and control of the in-year budget".
It also warned that while the Council has taken important steps towards the development of a realistic and affordable capital programme, "key priorities may be unaffordable in the short to medium term".
The warning was even more stark for financial sustainability, with the report stating that it is "inconceivable that service reductions will be avoided as the Council responds to the financial challenge ahead".
Chief executive Kenneth Lawrie told members of Falkirk Council that the red rating was "disappointing but inevitable" given that the council faces a budget gap of more than £69 million over the next four years.
He told members that working together to implement a financial strategy that looked ahead to future years was key to navigating the challenges.
Mr Lawrie noted that after a highly critical Best Value report from Audit Scotland, it was pleasing to hear the auditors' comment that "there has been good progress and a lot has been achieved in a short period of time".
The auditors said that positive steps forward included the new council plan, better induction for new councillors and "a really important financial strategy".
Work is also well underway for the council to review its capital spending and make sure it is affordable with Ms Scanlin dubbing this "prioritising priorities".
The leader of Falkirk Council, Cecil Meiklejohn said that "the important thing is that we respond positively, to ensure we have a plan in place to address our financial position".
"There are difficult decisions ahead for us to deliver financial sustainability and there are clear messages from our auditors on the need for us to work constructively together to agree our approach."
Cllr Meiklejohn said that councillors would need to focus on new approaches to transformation but it was vital that all councillors "recognise the gravity of the situation we are in".
"I am confident if we work together the council can deliver for communities," she said.
The SNP leader was however criticised by the Labour group as she defended the Scottish Government's record on council spending.
Cllr Meiklejohn said: "We know the Scottish Government has a finite budget that can only be split so many ways. The bulk of the funding will be going into health and its difficult to disagree with that.
"This position will not change without constitutional change and the sooner that happens the better."
But Labour leader Anne Hannah replied: "The fact of the matter is that the Scottish Government has reduced spending on local government in Scotland year on year and reports that we have seen have said that on numerous occasions.
"But this council has no role in constitutional change and I am very disappointed that the matter has been brought up."
Speaking after the meeting Cllr James Bundy, the Falkirk Conservative spokesperson for Economic Development, said that the report "made clear the impact Scottish Government cuts are having in our community".
He added: "Continuous cutting from the Scottish Government will result in Falkirk Council’s budget decreasing, resulting in the Council having to make tough decisions about the future of services in Falkirk.
“Rather than continuing with SNP austerity, the Scottish Government should be taking advantage of the largest block grant from the UK Government and increasing the funding received by Falkirk Council. This would help protect services in Falkirk.”
