FOR the third year in a row, Cooma-Monaro Shire Council has reported an operating deficit on its financial statements, in the red by $2.79million for 2012-2013.
Despite the result, it was a significant improvement on the previous year's deficit of $4.492million, and the budget expectations of $4.48million.
The results were outlined in the auditor's report on the general purpose financial statements conducted by Auswild & Co.
It stated that despite the deficit, council was in a relatively sound financial position.
Mayor Dean Lynch said the main reason for the negative result was depreciation.
"The deficit is driven by the level of depreciation and reflects the fact that council is unable to generate enough revenue to fund the deterioration of its infrastructure assets," he said.
"It is a problem faced by most rural NSW councils. Council generates sufficient revenue to fund its annual operations and part of the asset deterioration expense but not all."
The trend of council's deficit started in 2010-2011 with a deficit of just over $5million, when depreciation expenses attached to roads, bridges and footpaths increased substantially following the revaluation of these assets to fair value according to the auditor.
Cr Lynch said the deficit was concerning in terms of maintaining asset condition into the future and being able to fund capital works as needed.
"We have reasonable levels of reserves but like many councils face challenges in terms of infrastructure spending into the future and generating enough cash to put aside for future capital works. We are constantly looking for better ways to operate which are cost effective and efficient," he said.
Council's reserves have remained steady over the past few years but in the opinion of the auditor will need to be increased to ensure council has adequate liquidity to meet its obligations to maintain and improve infrastructure and services. "The adequate funding of reserves is probably the greatest challenge facing local government," the report stated.
Council has a number of options available to get back to surplus which Cr lynch said would be discussed as part of the 2014/2015 planning and budget cycle.
"Options open to council include above rate pegging rate variations, something that many NSW Councils have done, reviewing the services that council provides and determining, in consultation with the community, service levels which could include not providing particular services at all into the future," he said.
Cr Lynch said while the NSW Treasury Corporation (TCorp) suggests that all councils should be in a surplus position, there is debate as to whether this is in fact necessary as councils have access to other sources of funds such as grants and loans to fund infrastructure upgrades.