Stoush between state and local governments over 'red fleet' firefighting assets heats up

Several councils have written to numerous State Government representatives, angry over what they perceive as a “blatant and nonsense” legislative requirement that could cost their bottom lines.

However the State Government has fired back, saying they have the wrong end of the stick over the matter.

It’s all about ‘red fleet’ firefighting assets, which are the fire trucks used by local brigades for fire mitigation activities.

The issue’s been around for a number of years, but has come to a head with the recent NSW Auditor General’s Local Government 2021 report, which found 68 councils did not record firefighting equipment in their financial statements, an untracked resource worth an estimated $145 million.

These councils included Cootamundra-Gundagai, Griffith, Hilltops, Queanbeyan-Palerang, Snowy Monaro, Wagga Wagga and Yass Valley, among others.

A further 41 councils do recognise these assets in their books.

The report stated the NSW Government had confirmed these assets were not recognised by the state nor were they controlled by the NSW Rural Fire Service (RFS).

It said the assets could only be “controlled and therefore recognised by councils” and that “despite this, many councils do not report these critical assets in their financial statements”.

The Auditor-General argued in her report this led to an “increased risk” these assets could potentially not be managed or maintained properly, and urged the Office of Local Government to intervene as a “matter of priority”.

She also questioned if councils weren’t complying with accounting standards by not recognising these assets.

The Auditor-General recommended councils conduct a “full asset stocktake” of their red fleets and include them on their 30 June 2022 financial statements.

But councils have pushed back.

Many have voted in recent meetings to object to the determination they own red fleets, arguing they are instead RFS assets, and have refused to conduct stocktakes.

They also want the Rural Fires Act 1997 amended to “make it clear” they are RFS assets rather than councils’.

Snowy Monaro Regional Council mayor Narelle Davis described the situation as “blatant and nonsense”.

“How can we have oversight over assets we didn’t purchase, have no control over and that’s in the hands of local brigades?” she said.

“It’s just the craziest, craziest decision.”

She acknowledged that while the red fleet may have originally been vested to councils, a lot had changed since the Rural Fires Act 1997 was created.

“When that legislation was put through, firefighting equipment was tanks in farmer’s backyards and in a really poor state,” Ms Davis said.

“Since then the State Government has put a lot of money into upgrading the equipment … however council has had no say or oversight into those assets or the funding of those assets.

“We don’t have a responsibility in this except for a clause in that legislation.”

She argued the current arrangement worked as it was and nothing needed to change.

“It’s just another cost-shift by State Government which continuously tries to micromanage local governments,” Ms Davis said.

Queanbeyan-Palerang Regional Council (QPRC) mayor Kenrick Winchester used his 24 August mayoral minute to refute the Auditor-General’s determinations.

“Councils do not have any say in the acquisition, deployment, or disposal of these assets,” he submitted.

“The Government’s blanket determination is not only nonsensical, it is also inconsistent with the treatment of the comparable assets of other emergency service agencies such as Fire and Rescue NSW and the State Emergency Service. There is no rational reason for maintaining this anomaly.”

QPRC’s CEO Rebecca Ryan said the current value of the red fleet held by RFS brigades in the region was $4.7 million, with an estimated additional annual depreciation cost of about $400,000.

Ms Ryan said it was another cost to ratepayers that impacted the council’s budget.

“To date [the council] has not accounted for these assets, as we do not have the care and control of these vehicles; we do not know where they are housed in most cases,” she said.

These positions have been backed by Local Government NSW, which accused the State Government of a “cost-shifting” exercise which was holding the local governments to “ransom”.

President Darriea Turley said recording red fleets on council budgets would lead to many having to cut expenditure on critical infrastructure and services.

“At a time when many councils are struggling with rising inflation and increasing repair costs due to recent natural disasters, the position the NSW Government is taking is completely unacceptable,” she said.

“The NSW Government’s position on this matter also disproportionately punishes rural and regional council committees, where most RFS assets are located.”

Deputy Auditor-General Ian Goodwin was questioned over this issue at Budget Estimates on Wednesday afternoon (7 September), where he stressed this was an accounting presentation issue with “no cash impact” on councils.

“The issue here is it’s sort of being conflated with a bit of noise around cost-shifting,” he said.

“These are assets that are given free of charge to councils. The assets are purchased under the Rural Firefighting Fund, which councils and insurance companies and the State Government contribute to, and then they are vested under law – so legal title passes by vesting to councils, so there’s no cash transaction.”

He explained councils were essentially given the red fleet free of charge, which meant councils recognised revenue when chalking them up as an asset in the first year, but then had to record depreciation expense in the years to come.

However he said there was no net impact over the life that the assets depreciated.

Mr Goodwin said this could lead to “timing drag” where the revenue in the first year may have been forgotten, and so therefore the depreciation looked like a loss.

He said it generated an interesting accounting question “because often councils who don’t want to book this say that they incur a depreciation charge, and that’s an expense”.

“But because it’s an asset given free of charge, the accounting consequence is that you book at fair value as revenue upfront in year one,” he said.

Mr Goodwin said it was a question of how the accounting was presented, with no impact on cash.