The report revealed that a quarter of councils raise more through local services charges than they do through council tax.
However, it said many councils are failing to use charges effectively or demonstrating what benefits they can bring to communities.
For example, the report said councils could use charges to promote fitness among disadvantaged groups by offer reductions at sport centres or tackle congestion by introducing road charging.
Audit commission chairman Michael O'Higgins said: "The public is more willing to pay charges if they can see what they can get for their money. They need to know why the council has decided to charge for some services, but subsidise others.
"Councils should look at what they charge and who pays so they can make better use of charging to improve outcomes for local people."
To read a copy of the report in full click here