North Ayrshire Council has been praised for its approach in tackling a looming £47m funding gap.

The Accounts Commission said the local authority was "thinking big" with its approach to improving services and reducing poverty, while "demonstrating a commitment to sustainable change".

However, the report noted "significant medium-term financial risks" still face the council, particularly regarding spending on health and social care - a situation that could risk services in the future.

Jo Armstrong, the chair of the Accounts Commission, said North Ayrshire is "an exemplar of how to do change and innovation well".

The report cautioned that although North Ayrshire currently has reserves to cover immediate budget gaps forecast, "its service cost base is not sustainable" and cash reserves could be depleted in the long-term without further recurring savings.

Health and social care activities remain under pressure, with £3.7m of savings identified for 2025/26 falling in this area.

North Ayrshire Integration Joint Board - the governing body of the area's Health and Social Care Partnership - forecast a "best case" budget gap of £8.1m and a "worst case" of £21.4m for the 2025/26 financial year.

Budget gaps are the difference between what a local authority intends to spend in a year, and how much money they have coming in.

Auditors added that "the overall outlook for the council remains challenging", citing budget gaps of £3.6 million in 2026/27, and a further £7.4 million for 2027/28 in the general funds remaining category.

However, the Accounts Commission wrote that oversight and scrutiny arrangements are robust, while the local authority has in place good community relationships that should help with difficult decisions.

A voluntary redundancy programme resulted in 85 employees leaving the council and creating £2.4 million of savings. A further 45 employees are expected to leave in the coming year through what the report called "vacancy management".

The audit praised the council for being self-aware, committed to reducing inequality and actively identifying areas to improve in.

It wrote: "Communities across North Ayrshire should be reassured about how the council plans and manages its finances, and the way in which it is proactively working to address structural budget gaps and contextual challenges, including deprivation and a declining population."

The region's aging population is expected to decline by about 4% by 2033/34.

The local authority was also praised for "demonstrating a real willingness to 'think big' and a commitment to sustainable change", highlighted by it setting up a solar PV farm at Nethermains, between Irvine and Kilwinning.

An embedded approach to community engagement and empowerment was also paying off, including engaging with young people, and a new approach to budget consultation which succeeded by involving residents in the process.

The report added: "We would urge senior officers and elected members to now confidently push on with this work despite political and structural complexities, ensuring that financial benefits can be realised in the medium term and wider benefits delivered in the longer term."

Jo Armstrong, the chairwoman of the Accounts Commission, said the council had not lost sight of core commitments.

She said: "North Ayrshire Council is an exemplar of how to do change and innovation well, and other councils can learn from what they are doing and how they're doing it.

"The council is thinking big as it looks at sharing more services and focusing on what needs to change, but it hasn't lost sight of its core commitment to improving residents' lives and actively listening to its communities.

"Councillors and senior staff now need to continue acting with confidence, collaboration and across political parties, to focus on delivering change and economic growth across the region."

Council facing £47m budget gap but praised by auditor