Council leaders in Devon and Cornwall have been warned they could end up in front of a judge if they fail to tackle equality issues properly when setting next years' budget.
Equality South West (ESW) has written to councils in the region to remind them of their duty to assess the impact their financial decisions will have on people.
Katie Pratt, chief executive at ESW said she understood councils were struggling with reduced funding from central government, but legal action was costly.
She said: "We know councils are facing difficult financial decisions but it's important they reach these decisions in a fair and transparent way.
"They have a duty to eliminate discrimination and promote equality for all members of the community they serve, and we are happy to work with them to ensure they meet their legal obligations.
"If authorities fail to prove their decisions have been taken in compliance with the public sector equality duty, they can be challenged and taken to a judicial review.
"Defending yourself through the courts can be time-consuming and expensive in itself, so it's much better for councils to reach the correct decision the first time."
ESW will write to public bodies including health and wellbeing boards, local and economic partnerships and police and crime commissioners.
But the warning came too late for Devon County Council, which is in the midsts of a legal wrangle. It was dragged down the judicial review road over claims that council leaders failed to meet their Public Sector Equality Duty by not properly considering how their actions would affect vulnerable people. Last year a court ruled the council had failed to lawfully consult three care homes while working out how it would pay for residents to be looked after in 2012/13.
In response to Ms Pratt's warning, Andrew Leadbetter, the council's cabinet member with responsibility for equalities, said the authority tried to serve vulnerable people as best it could. He said: "As a responsible public body we take the issue of equality and fairness very seriously and see it as an integral part of everything we do and every decision we take.
"We always try to ensure that we not only carry out our legal duty with regard to equality but also uphold the spirit of the law in being mindful of the real impacts of what we do on the people and communities we serve, and particularly on the most vulnerable or disadvantaged."
Carolyn Rule, Cornwall Council's cabinet's portfolio holder for health, wellbeing and people, said the authority had taken steps to ensure equality.
She said: "We take this responsibility extremely seriously – so much so that we have made it an executive responsibility which comes under my remit.
"We have strengthened our equality and diversity policies, appointed a new member champion and created a new officer role to ensure equality and diversity issues are at the forefront of all our considerations.
"I have also put a new system in place to ensure that all council reports are proofed for equality and diversity issues by way of an equality impact assessment."
The Conservative Councillor for Mullion added: "This is a challenging time for all councils, but both I and my colleagues are committed to doing everything in our power to protect those who are most vulnerable in our community."