The LGA surveyed the 11 pathfinder areas where the scheme was tested from January and found that councils were unhappy with the new deal's contractual arrangements.
The report says: 'Many of the authorities surveyed felt that the process and documentation were too bureaucratic and too rigid, with processes of clarification taking too long.'
The majority of councils in the pilot areas were confident the employment service fully understood the contribution the authority could make to the programme.
'On the other hand, where relations were poor or non-existent, in many cases putting the new deal in place to a tight timetable has often been at the expense of securing effective local partnerships.'
Some 58% of councils surveyed were involved in offering work on the programme's environment taskforce, 39% involved with the voluntary sector option, but only a small number participated in the employment option.
The reports also says that councils have continued to contract and this year's financial settlement will lead to further cuts and moratoriums on recruitment.
'Recruiting new deal employees (and, more importantly, retaining them after six months) in those circumstances would run contrary to the new deal conditions,' it says.