The surplus of $749,000 for group activities, including the City College residential facility, was higher than the $502,000 budgeted and was "very pleasing indeed", chief executive Phil Ker said in the 2009 annual report released last week.
Academic activities alone recorded a surplus of $550,000, $28,000 more than budgeted.
In 2008, the polytechnic recorded its worst financial result for five years - a $337,000 deficit for academic and group activities and a $519,000 deficit for academic activities.
The main reason for the deficit was a redundancy bill of $1.09 million, Mr Ker said at the time.
In the 2009 annual report he was cautious about the polytechnic's financial result next year, saying that was when the full impact of a $5 million annual Government funding cut would take effect.
"Unfortunately, we still have more to do to cope with the next round of scheduled funding cuts ...
This will be our biggest challenge yet, given that there is still several million dollars to find from within an institution which has already been pared to the bone.
"We are determined to rise to the challenge and to do it without compromising outcomes for our learners."
Otago Polytechnic had 3145 equivalent full-time students (efts) last year, 38 below target, the report showed.
Of the total, 73.5% were studying at level 4 or above - just below the polytechnic's target of 75% - while almost 51% were under 25 years old, well under the target of 64%.
The polytechnic had largely met its targets for student retention, course completion and qualifications gained, but a larger-than-expected number of first-year students had dropped out of their studies last year, the report said.
Across all courses, almost 55% of first-year students had dropped out, while 73.5% of those enrolled in sub-degree certificate courses had done so.
The polytechnic's target was less than 40% at all levels.
However, the report noted 2009 attrition rates had been calculated from the 2008 annual report and the way attrition was recorded had been improved this year to ensure greater accuracy.
