Tough decisions must be made at a "reasonable pace" if Renfrewshire Council is to bridge a potential budget gap of £50 million in the next three years.

The alarm was sounded by the external auditor at a special meeting held on Thursday to discuss a key report on the local authority's financial statements. Azets, the company leading that work, handed the council an amber rating – the second-most serious grade it can issue behind red – for financial sustainability. "Close attention" will now be paid to decisions made in that area.

The findings come as the council faces a funding gap of £45m to £50m for 2024 to 2027 – a figure that would reduce to £30m to £35m with a five per cent uplift in council tax each year. It is not yet clear how a planned council tax freeze – announced by First Minister Humza Yousaf last month, which the Scottish Government has insisted will be fully funded – will impact that projection.

However, financial experts have told the local authority it must consider how to address the challenges that are on the horizon. Gary Devlin, partner at Azets and external auditor appointed to Renfrewshire Council, said: "The key thing from the external audit perspective is that the council has to make difficult decisions on how it's going to bridge that gap and it has to do it at reasonable pace going forward in order to guarantee a financially sustainable future.

"There's a whole mix of challenges in there, wage inflation, general inflation and decisions that you need to make which have in the past mostly affected two of the council services. We're saying that going forward the council needs to look at some of its big-spending departments. We didn't think from what we can see that the current approach would be a sustainable approach."

The report identified a "significant risk" in relation to financial sustainability. It also pointed out the "uncertain impact" of cost pressures on the council's finances and delivery of services. Mr Devlin added: "The key point that we raise, and we raise it again, is we are quite clear that in our view the council has to take action to address the budget deficit. There is time for the council to do that but we will be paying close attention to the council's decisions in that area."

Councillor Graeme Clark, a Labour representative for Paisley Northeast and Ralston, said: "We desperately need a sustainable solution to close the medium term budget gap but nothing is being brought forward."

Responding to comments from opposition elected members, council leader Iain Nicolson defended the work of the local authority as it contends with a difficult economic climate. "This is actually a very successful council," the SNP representative for Erskine and Inchinnan said. "I know you like to think we're failing but we don't. We actually produce successful budgets every year in the face of mounting challenges with regards to finances and you know that as well."

Savings in excess of £170m have been made by the council since 2011, but more will be needed to balance the books in the future. Alastair MacArthur, director of finance and resources, said: "The council's financial sustainability is an ongoing concern and the council will need to make, potentially, some difficult decisions moving forward because the outlook is fairly challenging. There is potentially a risk to the scale of council services that the council can afford to deliver."

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