An independent audit of the City of Perth has found a lack of clarity about roles following a restructure is causing "unconstructive tension".
The $500,000 report into the city's operations - which examined legislative compliance, rigour and transparency, and capability and value - made 17 findings and several recommendations.
It found there was inconsistent management reporting and the executive leadership did not have information needed to make effective decisions.
Certain corporate business controls were weak, leading to a reliance on manual effort to maintain compliance and manage risk, and new roles and responsibilities implemented as part of a 2015 restructure were not well understood.
"The lack of organisation-wide clarity and shared understanding of roles and responsibilities is causing indecisiveness, wasted effort and unconstructive tension between teams," the report said.
The report found "silos were deepening" due to ineffective team collaboration, which could affect staff morale and retention of talent.
It comes after the State Administrative Tribunal found embattled Lord Mayor Lisa Scaffidi had breached the Local Government Act 45 times by not disclosing accommodation and travel gifts, including a $16,000 package to the Beijing Olympics paid for by BHP Billiton.
The SAT is yet to hand down its penalty, but the premier has repeatedly called for Ms Scaffidi's resignation.
The city's chief executive Martin Mileham said the audit was "a message to me and to the executive to make sure that that doesn't continue".
"We haven't had a similar fine tooth comb of the city for over 20 years," he told reporters.
Mr Mileham admitted he was concerned spending growth had been higher than revenue growth, adding that a deficit was "not an option".
"Local government is not allowed to make too much money. On the other hand, it's not allowed to lose money."
The city is already implementing changes including a new risk management framework, heightened transparency, appointing a procurement specialist, and revising sponsorships, discretionary spend and service provision.
It is also finally developing a commercial parking business plan, as required by the 1995 Act.