The Eurobodalla Shire mayor, Mat Hatcher, took a stand at last Tuesday’s Local Government NSW (LGNSW) Summit calling for the New South Wales Government to stop “cooking the books” on assets belonging to the Rural Fire Service (RFS). The call follows the receipt of qualified audits by around 40 councils, due to their refusal to include the depreciation cost of assets they neither own nor control. LGNSW President Darriea Turley AM said.
“This financial sleight of hand, where depreciation costs are dumped onto council accounts to make state government budgets look better, is misleading and disingenuous.
“The bottom line is that equipment ordered by; used by; maintained by; and disposed of by the RFS is the property of the RFS, and the depreciation needs to be recorded accurately in their accounts.
“But despite this, the NSW Government continues to dig its heels in on the issue and heap more financial uncertainty on the local government sector at a time when councils facing unprecedented natural disasters can least afford it.
“Qualified audits create serious financial repercussions if they limit councils’ ability to obtain loans and the grants they depend on to serve their community.
“The government needs to do the right thing: take back control of the RFS assets and restore accounting transparency to the process.”
Cr Turley said LGNSW and councils across NSW wholeheartedly support the efforts of RFS volunteers who do a heroic job to keep communities safe.
“This is purely about questionable accounting practices adopted by the NSW Government,” Cr Turley added.
It has long been noted that he dumping of RFS equipment depreciation costs on council accounts would result in less money for road and asset maintenance, council services and local community infrastructure.
In July 2022 the Council decided to write to the Auditor General for New South Wales to advocate that the NSW Government acknowledges rural firefighting equipment is controlled by and is the property of the State government and advise that Council’s financial statements have been prepared in accordance with the Australian Accounting Standards, as required by the Local Government Act and such assets will not be recorded in Council’s financial statements.
The NSW Auditor General tabled a "swifty" to Parliament in part, recommends that NSW Council’s should include rural firefighting equipment, that has been vested to them, in their financial statements and depreciate them.
The issue is that the State Government says it does not control these assts, so therefore, “by default” they must be controlled by the councils that they are vested in.
They come unstuck though because, by the State Government’s own Local Government Accounting Code of Accounting Practice and Financial Reporting councils can choose whether, or not, to record this Rural Fire Service (RFS) equipment as part of their financial statements.
The Local Government Code of Accounting Practice acknowledges the need for this assessment to be undertaken prescribing that .... “Councils need to assess whether they control any rural firefighting equipment in accordance with Australian Accounting Standards”.
The RFS assets include fire control centres, fire training centres and all the fire sheds. It also includes plant and equipment commonly referred to as ‘red fleet assets’ which refer to fire trucks and vehicles. Those councils not recording this equipment and Local Government NSW refute the determination that council’s control the rural firefighting equipment and hence do not meet the asset definition criteria due to lack of such control. Councils do not have any say in the acquisition, deployment or disposal of these assets. Some Councils have also raised concerns that the requirement breaches Australian Accounting Standards.
Statement of Accounting Concepts (SAC) 4 – Definition and Recognition of the Elements of Financial Statements Definitions Clause 14 “Assets” are future economic benefits controlled by the entity as a result of past transactions or other past events; and “Control of an asset” means the capacity of the entity to benefit from the asset in the pursuit of the entity’s objectives and to deny or regulate the access of others to that benefit.
In the Mayor's report he states:
It is considered that Council must have the right to economically benefit from the assets. The benefit being measured in economic terms, would relate to the ability of Council to use the assets to deliver its own services.
Council has no right of use to the RFS equipment and hence does not economically benefit from them. A right not only includes the right of the entity to benefit from the asset but also the ability to deny other entities having any access to the use of rights. Council is unable to deny the RFS from using the equipment. State Government legislation including Rural Fires Act 1997 which is applicable to the RFS would stipulate they deliver their services using these assets for their whole life. On interpretation, it could be argued that the RFS has the rights to economically benefit from these assets.
A question asked by Councillor Anthony Mayne during the meeting revealed that if Council takes on responsibility of the asset they would also be taking on over $1 million in depreciation to cover the last two years where they have refused to allow the RFS assets to come on to their books (other than RFS buildings on Council land).
The Council's resolution of July 2022 saw them write to the Auditor General for New South Wales and advocate that the NSW Government acknowledges rural firefighting equipment is controlled by and is the property of the State government, and advise that Council’s financial statements have been prepared in accordance with the Australian Accounting Standards, as required by the Local Government Act and such assets will not be recorded in Council’s financial statements.
Basically "State Government, stick this up your butt - your responsibility, your budget, stop shirking your responsibilities!!