Argyll and Bute, which was warned late last year local services could suffer if the quality of political leadership did not improve, has been told councillors still need to embrace new ways of working if the authority is to be turned around.
It will also face a further review by Audit Scotland by the end of next year to see if progress is being made.
While acknowledging the council has taken steps towards improving, the Accounts Commission has warned Argyll and Bute "has a very long way to go", with "difficult decisions ahead".
Last October, the local government auditor called for urgent action to improve the running of the council, citing the poor quality of its political leadership.
The new Accounts Commission report acknowledges the local authority "has responded constructively" but states much more work is required.
Commission chairman Douglas Sinclair said: "Difficult decisions lie ahead, particularly with regards to reducing finances, which will undoubtedly test the improvements made by the council. The council must continue to work together."
Argyll and Bute Council leader Dick Walsh said: "No council is more committed to improvement than Argyll and Bute. We have a strong track record of working together … We are confident that when Audit Scotland return to Argyll and Bute Council in 2015 … they will see that we have built with determination on the strong foundation that we have already put in place."