CITY of Newcastle has balanced its books with a "modest" operating surplus of $4.2 million, down $3.9 million from what it had budgeted for.
While the council exceeded six key financial performance ratios set by the NSW Office of Local Government (OLG), it failed to meet benchmarks around building and infrastructure renewals, infrastructure backlog, and asset management.
City of Newcastle's (CN) financial statements are audited by the Audit Office of NSW (AONSW), but Newcastle Airport financials, while consolidated in the report, are audited separately by consulting firm PwC.
At the last council meeting, Newcastle Independent lord mayor Ross Kerridge said he had asked if the council's financials could be presented separately from the airport.
"I've recently spoken to Scott Moore about my thoughts that perhaps it is time to present the financials from the airport and Summerhill [Waste Management Centre] as a separate statement before consolidating, because it does tend to get cluttered up," he said.
Newcastle council had said it would hold a meeting last week to "dispel claims" the airport it owns with Port Stephens council was at "genuine" financial risk or that a ratepayer bailout is on the cards after a Newcastle Herald investigation revealed the airport's property arm needs a funding injection.
The Herald understands Port Stephens Council and Newcastle council each account for a 50 per cent portion of the airport's assets, liabilities, income, and expenses in their financial statements.
The AONSW receives information from the joint airport operation and its auditor, PwC, to support transactions recorded in CN's financial statements.
Newcastle council's financial statements have been given the AONSW's tick of approval for the past 12 months.
CN chief executive Jeremy Bath said the audit outcome highlights the council's capacity to provide strong financial management while continuing to deliver essential services and infrastructure.
"The audit found no significant risks, fraud, or issues with our reporting processes," Mr Bath said.
"It confirmed City of Newcastle is managing finances responsibly and providing clear and timely information while working effectively with auditors on important areas like asset valuations."
The council spent $40.4 million carrying out works required to renew, replace, and upgrade its assets but was about 19 per cent shy of the 100 per cent benchmark.
The city's infrastructure backlog is double the benchmark of under two per cent. The council successfully applied for a 46.9 per cent rate rise over five years in 2015, which it said at the time would improve its financial position and reduce the city's infrastructure backlog.
Maintenance expenditure was also slightly below the benchmark.
CN exceeded benchmarks on operating performance, its fiscal flexibility, and the degree to which it relies on external funding sources.
The council also performed above the benchmark in its ability to meet short-term obligations, the availability of operating cash to service debt, and outstanding rates and annual charges.
Without any additional cash inflow, CN could continue paying for its immediate expenses for almost six months. The benchmark is greater than three months.
The council's expenditure grew by $12.3 million compared to the previous financial year. The council said that was mainly due to employee costs, which grew by $10.3 million or 8.2 per cent.
CN's total income from continued operations was $439.2 million, $16.7 million higher than the adopted budget for 2023-24.
The council's total operating expenditure was $388.6 million.
Ratepayers forked out $219 million in rates and charges, an increase of $10.6 million.
A report to councillors said the increase in rates was driven by the Independent Pricing and Regulatory Tribunal's 3.7 per cent rate peg along with growth in the number of rateable properties and an increase in the domestic waste charge per property.
Fees and charges grew by $8.6 million due to activities at Summerhill Waste Management Centre, increased live performance and ticketing income, and a $2.1 million increase in revenue consolidated for Newcastle Airport from the council's share of the entity.
Labor Cr Declan Clausen said at the meeting he wanted to make it clear there was no "irregularity" or "lack of auditing" on the council's financial statements.
"I'm imagining new councillors would have gained a lot of new information about the City of Newcastle and its operations as a result of engaging with the financial statements," he said.
"They record a year where City of Newcastle returned an operating result of $4.2 million, that is a commendable result for an organisation of the scale and complexity of the City of Newcastle.
"A very, very modest operating surplus, just one per cent of our operating budget, but ensuring that we're being very prudent in terms of the way that money is put aside to deal with crises that might arise in future financial years."
A council report said it delivered a record total spend of $143.4 million on project works across the city, 104 per cent of the budgeted works programs which was set at $137.3 million.
The program was revised to $139.7 million in the March Quarterly Budget Review.
More than $28 million was spent on infrastructure assets and facilities. A further $23.6 million went to creative and community services, $10.6 million of which was spent on aquatic facilities including the Newcastle Ocean Baths upgrade and Lambton Pool Grandstand.
Recreation and sport saw a $10.4 million spend, while more than $38 million went towards 'City Shaping Projects' including $19.3 million on Astra Street remediation, $17.5 million on the Newcastle Art Gallery expansion, and $1.3 million on Summerhill upgrades.
The council spent $15 million on planning and environmental activities and $17 million on city infrastructure revitalisation.
At the meeting, Greens Cr Charlotte McCabe said she felt it was important that the council has "extreme scrutiny" of its financial reports and mechanisms.
Cr McCabe acknowledged the council exceeded financial performance benchmarks and said she hopes it gives the community reassurance that its financial processes are "very much watertight".
CN received $46.4 million in grants and contributions for capital purposes.
Borrowing costs were $1.4 million higher than budgeted.
The final audit opinion will be presented to the council and public with the audited financial statements on November 26.
