Queensland indigenous councils are at high risk of becoming unsustainable, the state’s auditor-general says.

More than half of Queensland’s indigenous councils are losing money and there’s a high risk they will become unviable, a report says.

The state’s auditor-general found that 10 indigenous councils had incurred substantial losses during the past four years.

“Indigenous councils … face significant financial sustainability challenges due to their limited access to own source revenue,” Andrew Greaves said in his report covering the 2012-13 financial year.

Queensland has 19 indigenous councils but only 15 were included in the audit, tabled in state parliament on Tuesday.

Local Government Minister David Crisafulli was hopeful the government’s new “tough love” approach to indigenous councils would lead to improvements.

The government announced last year that it would withhold $3 million of the funding it gives to the state’s 19 indigenous councils annually.

To qualify for the funding, councils must now show they are raising their own revenue by collecting water and waste charges.

As a result we’ve seen council’s revenue increase in the last few months, Mr Crisafulli said.

“And I hope next year’s audit picks that up,” he told AAP.

Mr Crisafulli said the government’s long-term plan to allow home ownership in indigenous communities will allow councils to raise funds through rates and other charges.

AAP cleo/saj/mmr