Townsville City Council is facing intense scrutiny following a highly critical assessment by the Queensland Audit Office (QAO) regarding its financial management and governance of a major inner-city redevelopment project.

In a formal letter sent to Townsville Mayor Nick Dametto, the state's audit watchdog revealed that the council established a municipal-owned corporation, Northern Rail Yard Development Pty Ltd, without obtaining mandatory approval from the Queensland Treasurer. The QAO stated this bypassed critical legislative requirements applicable to local government authorities.

Failure of Governance and Delayed Audits

The council-owned company was established during the 2023-24 financial year to oversee the transformation of the former Queensland Rail depot in the Townsville CBD into a modern housing and commercial hub. To support its operations, the council funneled $624,000 in ratepayer-funded operational support to the entity over two financial years.

However, the QAO's first audit of the company uncovered severe weaknesses in governance, oversight, and financial reporting. According to the auditor, the council's failure to address these issues in a timely manner led to significant delays. By the time the compliance issues were resolved, the council had already decided to wind up the entity, leaving state auditors unable to issue an official audit opinion for that financial year.

Despite the company being deregistered in May 2026, the QAO has directed the council to prepare financial statements for the periods it did operate. The watchdog reminded council leadership that they maintain an ongoing obligation to report to local ratepayers on the financial performance of the defunct entity.

Project Restructured After State Funding Ultimatum

A council spokesperson explained that the failure to secure the Queensland Treasurer's approval stemmed from an inconsistency between the Local Government Act and the Statutory Bodies Financial Arrangements Act, adding that the legal requirements have since been clarified.

The dissolution of Northern Rail Yard Development Pty Ltd was ultimately a condition set by the state government to unlock $35 million in funding earmarked for the site's decontamination and development. The project has since transitioned into a direct partnership between the Townsville City Council and Flinders St Rail, a company owned by local developer Brad Webb.

Mayor Promises Full Transparency

Mayor Nick Dametto has defended the current progress of the CBD development, emphasizing that the administrative failures highlighted by the QAO are entirely separate from the active work on the ground.

"The compliance issues identified have nothing to do with the North Railyards project underway today," Mayor Dametto said. "The project is being delivered by local developer Flinders St Rail under a direct agreement with council, not the entity referenced in the audit."

The mayor assured the public that the council is committed to complete transparency and is currently negotiating with the QAO on how to include additional disclosures regarding the defunct company in its upcoming 2025-26 financial statements, which are expected to be released later this year.