The report on the 2013-14 local government audits identified Buloke Shire as being at "high risk of short-term sustainability concerns".

But Buloke Shire CEO John Hicks said the council's finances had turned around since the period covered by the report.

"If you have a look at this year's accounts they're very different, the audit report into this year's accounts will be very different from last year," he said.

"We've conducted a new budget last year which takes $1.35 million out of a $26 million dollar budget to reduce operating costs and in the next year we'll be taking out another $2.6 million to bring us to a total of $4 million and that will bring us to a position of sustainability over the next couple of years."

Mr Hicks said the financial difficulties identified in the report were typical of rural councils.

"Part of the problem is that it's almost impossible to provide a reasonable level of service with the kinds of resources that are available to a small rural shire, but we're getting there," he said.

Meanwhile, the Central Goldfields Shire council has refuted suggestions it is in financial trouble.

The Auditor-General's report also called into question the council's ability to pay its existing liabilities over the two years following 2015.

But Central Goldfields Shire CEO Mark Johnston said the council's own forecasts show its liquidity returning to surplus in 2018-19.

"We're very much aware of what our financial position is," he said.

"Our liquidity position returns to a very positive position within two to three years."

Mr Johnston said the decline in the council's liquidity ratio was likely due to major capital works coinciding with the council's response to recent flooding, and that factors affecting the sustainability of small shire councils were largely beyond their control.

"In the case of small rurals it turns out those characteristics over which councils have no control will impact negatively on revenue raising and cost containment," he said.