City's 2025 audited financial statements receive clean audit opinion with modest operating surplus
The Audit Committee received Toronto's 2025 consolidated financial statements, which showed a $108 million operating surplus and a $1.7 billion accounting surplus reflecting heavy capital investment. The city's external auditors, KPMG, issued unqualified (clean) audit opinions for all three statement sets. While infrastructure investment reached record levels since amalgamation, reserves are largely committed and the city faces ongoing pressure to balance service demands with constrained revenue tools.
Who did what
- Councillor Frances Nunziata (Ward 5) movedMoved adoption of financial statements item AU13.4
From the floor
“Population growth and evolving community needs created rising demand for both direct city services and services delivered on behalf of the federal and provincial governments. This was reflected in a $1.88 billion operating cost increase in 2025.”Speaker not identified
“A modest operating surplus of 108 million was achieved through active cost control and discipline. The city continued to invest significantly in infrastructure by adding over $6 billion of new tangible capital assets to support service delivery and to accommodate growth.”Speaker not identified
“It's important to note that the majority of the city's accounting surplus relates to the city's investments of tangible capital assets rather than the amounts generated from the operating surplus.”Speaker not identified
“While the operating result was favorable, this is a relatively moderate surplus. And it demonstrates that similar to other cities, our city has limited capacity to significantly replenish reserves through annual operating results alone.”Speaker not identified
“So theoretically, we could have come in with a zero budget increase, tax increase, and still had a few million dollars left for the surplus. Would that be a correct assessment?”Councillor Jamaal Myers (Ward 23)
“We had already accounted for those funds. Um I won't take up all of your time and talk about the challenges of using one-time funds for ongoing expenses. I'll leave that alone. But we had already accounted for that and leveraged it as part of our planning process.”Speaker not identified
“The reserves and discretionary reserve funds, which are part of our accumulated surplus balance, represents important fiscal tools. These balances provide flexibility to manage our ongoing financial risks, including stabilizing our tax rate changes, supporting various capital investments and responding to emergencies or unexpected events.”Speaker not identified
“Approximately 94% of our reserves were committed for various operating and capital priorities, which really shows that we're using our balances intentionally. However, this also indicates that there is limited flexibility to redirect these balances to new or emerging pressures without affecting our existing plans and commitments.”Speaker not identified
“I think we have around 12 billion when you combine the two [reserves and deferred revenue accounts] and we have around $40 billion of commitments.”Speaker not identified
Also in this item
• The city's tangible capital assets grew 81% over 10 years, from $27 billion in 2015 to $48.7 billion in 2025, reflecting sustained infrastructure investment but creating long-term maintenance and replacement pressures that will strain both capital and operating budgets.
• Toronto holds a AA+ credit rating from multiple agencies, which reduces borrowing costs; however, the city maintains a 15% debt-service-ratio cap to preserve operating revenue flexibility, and controller flagged that hitting capital spending limits while managing this ratio will require difficult prioritization choices.
• The city received the Canadian Award for Financial Reporting from the Government Finance Officers Association, and successfully implemented a new SAP S/4HANA accounting system in November 2025 without exceeding time or budget.
The journey
You can still act
On the Toronto City Council agenda for 2026-07-29
Decision
Audit Committee adopted the recommendation to accept the 2025 audited financial statements for the Consolidated City, Sinking Funds, and Trust Funds; the statements will proceed to City Council for final approval
Watch it happen
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