Neither the government nor councils want to be responsible for the ageing equipment — known as the ‘Red Fleet’ — and are passing off the financial responsibility and large depreciation burden.
On September 19, Federation Council councillor David Fahey said taking the Red Fleet onto council books would “make our bottom line look like it’s falling to pieces”.
“We are always getting kicked by the state government, all the time,” Cr Fahey said.
“It should be their responsibility, really, just like the police are. We don’t look after police cars.
“It is very disappointing when our whole state lobbied the NSW Government (to not have the Red Fleet), and we got slapped down.”
Depreciation is a massive issue for shrinking rural councils already struggling to find room on their budget sheets.
But the auditor-general and NSW Government have a different view.
Nearly 30 years ago, the 1994 eastern seaboard fires triggered a coronial inquest which found several rural brigades were using outdated firefighting equipment.
The Rural Fires Act 1997 was established to ensure councils were able to fulfil their legal obligation to mitigate fire risks on public land — just like they have a legal obligation to provide safe drinking water.
The Rural Fires Act 1997 instructs each council to contribute money towards the Rural Firefighting Fund.
The Rural Fire Service uses the fund to purchase equipment, and when the equipment is assigned to a brigade it’s ‘vested’ to the local council free of charge.
The RFS then uses the new ‘council’ equipment to undertake fire mitigation work on council’s behalf.
This agreement began in 1997, and while 41 NSW councils continue to log the vested equipment on their books, 68 councils have forgotten about the deal.
Cr Fahey from Federation Council wasn’t on board with the reminder and said the assets were not really free if councils had to cop the depreciation costs in their budgets.
“Somewhere in the accounting standards it has to be recognised that it’s really not our asset. It’s only numbers on a page,” he said.
“If we can have them on our books, but quarantine them in some way, then we will get a truer vision of what our financial position is without it being distorted by these items.”
The Red Fleet issue will be a massive topic at the upcoming Local Government NSW Conference (October 23 to 25), and Cr Fahey said councils needed to lobby the NSW Government to create this ‘quarantine’ account book idea.
About 60 rural councils have voiced similar protests against Red Fleet ownership.
Last month, Edward River Council wrote to NSW Treasurer Matt Kean, objecting to taking the Red Fleet on their books.
At a rough estimate, taking on the Red Fleet would chew a $481,000 hole in the Edward River Council’s budget in depreciation alone — annually.
But this is a non-issue, according to the auditor-general and the NSW treasury office.
When equipment is vested to councils, they log a profit.
For example, a $200,000 truck is gifted to Edward River Council in 2010 and the council records a $200,000 profit.
During the next 20 years as this truck depreciates, the depreciation cost is taken from this original $200,000 profit until it’s fully depreciated and the numbers reach zero — a neutral point where no profit or loss was ever made.
The fact that these councils did not log the up-front profit means they are now being shocked by the depreciation costs.
So how did so many councils forget about the 1997 agreement?
From 1997 to 2017, councils were allowed to hire their own private sector auditors who competed against each other for work and were incentivised to cut costs out of council books.
In 2017, the NSW Government introduced a single independent auditor.
The auditor-general quickly discovered several council budgets had lost important details along the way.
On September 7, 2022, Deputy Auditor-General Ian Goodwin was questioned in parliament about the Red Fleet issue.
“(This issue) became obvious when the auditor-general took over the mandate to audit the local councils and identified that there was a large portion — in excess of $100 million — of pretty critical equipment that was not being accounted or booked in any government records,” Mr Goodwin said.
“To be clear, there’s no cash impact on councils. These are assets that are given free of charge to councils.”
Edward River Council general manager Phil Stone spoke at the council’s August 16 meeting and strongly recommended council keep the Red Fleet off their books.
“The state government can’t force councils to recognise assets it doesn’t own. It’s a bit of bluster and our recommendation is to hold firm,” Mr Stone told councillors.
In July, Berrigan Shire Council agreed to take an nearly identical course of action, informing the NSW treasurer they would not accept the Red Fleet on their books.
Murray River Council has taken a similar stance and is pressuring the NSW Government to amend section 119 of the Rural Fire Service Act 1997 to make it clear councils don’t own the Red Fleet.
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