What this report is about

Results of the local government sector financial statement audits for the year ended 30 June 2023.

Findings

Unqualified audit opinions were issued for 85 councils, eight county councils and 12 joint organisations.

Qualified audit opinions were issued for 36 councils due to non-recognition of rural firefighting equipment vested under section 119(2) of the Rural Fires Act 1997.

The audits of seven councils, one county council and one joint organisation remain in progress at the date of this report due to significant accounting issues.

Fifty councils, county councils and joint organisations missed the statutory deadline of submitting their financial statements to the Office of Local Government, within the Department of Planning, Housing and Infrastructure, by 31 October.

Audit management letters included 1,131 findings with 40% being repeat findings and 91 findings being high-risk. Governance, asset management and information technology continue to represent 65% of the key areas for improvement.

Fifty councils do not have basic governance and internal controls to manage cyber security.

Recommendations

To improve quality and timeliness of financial reporting, councils should:

• adopt early financial reporting procedures, including asset valuations
• ensure integrity and completeness of asset source records
• perform procedures to confirm completeness, accuracy and condition of vested rural firefighting equipment.

To improve internal controls, councils should:

• track progress of implementing audit recommendations, and prioritise high-risk repeat issues
• continue to focus on cyber security governance and controls.

Read the PDF report

What this report is about

Result of the Transport portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all Transport portfolio agencies.

An 'emphasis of matter' paragraph was included in the Transport Asset Holding Entity of New South Wales' (TAHE) independent auditor's report, which draws attention to management's disclosure regarding proposed changes to TAHE's operating model.

Government's decision to convert TAHE into a non-commercial Public Non-Financial Corporation may impact the future valuation and the control of TAHE's assets.

Transport for NSW's valuation of roads and bridges resulted in a net increase to its asset value by $15.7 billion.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders' costs, clearer guidance on how to account for these costs in agency's financial statements is required.

The key audit issues were

The number of issues reported to management decreased from 53 in 2021–22 to 49 in 2022–23.

High-risk findings include:

• gaps in how Sydney Metro manages its contractors and how conflicts of interest are recorded and managed
• future financial reporting implications to account for government's proposed changes to TAHE's future operating model, including asset valuations and control assessments of assets and operations
• Parramatta Park Trust's tree assets' valuation methodology needs to be addressed.

Recommendations were made to address the identified deficiencies.

This report provides Parliament and other users of the Transport portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Transport portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Transport portfolio.

Appendix one – Misstatements in financial statements submitted for audit 

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting 

Appendix four – Financial data 

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What this report is about

Results of the Planning and Environment portfolio financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all completed Planning and Environment portfolio agencies. Seven audits are ongoing.

The Catholic Metropolitan Cemeteries Trust (CMCT) did not comply with its obligations under the Government Sector Finance Act 2018 (GSF Act) to prepare and submit financial statements for audit.

The Department of Planning and Environment (the department) has not yet provided their assessment of the financial reporting requirements for the 579 Category 2 Statutory Land Managers (SLMs) for 2022–23.

One-hundred-and-nineteen Commons Trusts are non-compliant with the GSF Act as they have not submitted their financial statements for audit.

We issued unqualified opinions on the Water Administration Ministerial Corporation's 2020–21, 2021–22 and 2022–23 financial statements.

The number of monetary misstatements identified in our audits decreased from 59 in 2021–22 to 51 in 2022–23, however the gross value of misstatements increased.

The key audit issues were

The former Resilience NSW and NSW Reconstruction Authority (the Authority) re-assessed the accounting implications arising from contractual agreements relating to temporary housing assets associated with the Northern Rivers Temporary Homes Program. This resulted in adjustments to recognise the associated assets and liabilities.

We continue to identify significant deficiencies in NSW Crown land information records.

The department has not been effective in addressing the differing practices for the financial reporting of rural firefighting equipment vested to councils under section 119 (2) of the Rural Fires Act 1997.

The number of findings across the portfolio reported to management increased from 132 in 2021–22 to 140 in 2022–23. Thirty per cent of issues were repeated from the prior year.

Seven high-risk issues were identified. These related to the findings outlined above, deficiencies in quality reviews of asset valuations, internal control processes and IT general controls.

The audit recommended

Recommendations were made to the department and portfolio agencies to address these deficiencies.

This report provides Parliament and other users of the Planning and Environment portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting

• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Planning and Environment portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines our observations and insights from our financial statement audits of agencies in the portfolio.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures 

Appendix three – Timeliness of financial reporting 

Appendix four – Financial data

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What this report is about

Results of the Regional NSW financial statements audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued on all completed audits in the Regional NSW portfolio agencies.

The number of monetary misstatements identified in our audits increased from 28 in 2021–22 to 30 in 2022–23.

What the key issues were

Effective 1 July 2023, staff employed in the Northern Rivers Reconstruction Corporation Division of the Department of Regional NSW transferred to the NSW Reconstruction Authority Staff Agency.

The Regional NSW portfolio agencies were migrated into a new government wide enterprise resourcing planning system.

The total number of audit management letter findings across the portfolio of agencies decreased from 36 to 23.

A high risk matter was raised for the NSW Food Authority to improve the internal controls in the information technology environment including monitoring and managing privilege user access.

What we recommended

Local Land Services should prioritise completing all mandatory early close procedures.

Portfolio agencies should:

• ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards
• prioritise and address internal control deficiencies identified in audit management letters.

This report provides Parliament and other users of the Regional NSW portfolio of agencies financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Regional NSW portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines our observations and insights from our financial statement audits of agencies in the Regional NSW portfolio.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What this report is about

Results of the Stronger Communities financial statement audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued on all completed Stronger Communities portfolio agencies.

Machinery of government changes during the year returned the sports-related agencies to the Stronger Communities portfolio.

Resilience NSW was abolished on 16 December 2022 with most of its functions transferred to the newly created NSW Reconstruction Authority.

The Trustee for the First Australian Mortgage Acceptance Corporation (FANMAC) is a prescribed entity under the Government Sector Finance Regulation 2018. The Trustee should have presented the FANMAC's financial statements for audit after it became a GSF agency on 1 July 2020.

The number of monetary misstatements identified in our audits decreased from 42 in 2021–22 to 29 in 2022–23.

What the key issues were

In 2022–23, agencies in the portfolio recorded net revaluation uplifts to land and buildings totalling $643 million.

Out of home care and permanency support grant expenditure has increased by 27% since 2019–20. An upcoming performance audit report will focus on the timeliness and quality of the child protection services provided by the department and its non-government service providers.

A high-risk matter was raised for the department over segregation of duties deficiencies in the Justice Link system.

Four high-risk matters reported in 2021–22 have been resolved.

Thirty-three agencies were onboarded into a new government-wide enterprise resource planning system. Additional agencies will be onboarded in three tranches from April 2024 through to October 2024.

What we recommended

Portfolio agencies should:

• ensure any changes to employee entitlements are assessed for their financial statement impact under the relevant Australian Accounting Standards
• prioritise and address internal control deficiencies identified in our management letters.

This report provides Parliament and other users of the Stronger Communities portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Stronger Communities portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines our observations and insights from our financial statement audits of agencies in the Stronger Communities portfolio.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What this report is about

Results of the Education portfolio of agencies’ financial statements audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued for all Education portfolio agencies.

An ‘other matter’ paragraph was included in the TAFE Commission’s independent auditor’s report as it did not have a delegation or sub-delegation from the Minister for Education and Early Learning to incur expenditure on grants from other portfolio agencies.

What the key issues were

Comprehensive valuations of buildings at the Department of Education (the department) and at the TAFE Commission found that certain assumptions applied in previous years needed to be updated, resulting in prior period restatements.

The department prepaid a building contractor for early works on a project and some of the prepayment is in legal dispute.

The department duplicated a claim for project funding from Restart NSW in 2021.

New parental leave legislation increased employee liabilities for portfolio agencies. The department and the NSW Education Standards Authority (the Authority) updated their financial statements to record parental leave liabilities.

A high risk matter was raised for the Authority to improve the quality and timeliness of information to support their financial statement close process.

What we recommended

Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards.

The department should:

• improve processes to ensure project claims are not duplicated
• assess the risks associated with providing prepayments to contractors.

This report provides Parliament and other users of the Education portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Education portfolio (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines our observations and insights from our financial statement audits of agencies in the Education portfolio.

Appendix one – Early close procedures

Appendix two – Financial data

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Introduction

The Auditor-General's financial and performance audits of local councils aim to improve financial management, governance and public accountability across the local government sector.

Annual Local Government reports to Parliament have consistently highlighted risks and weaknesses across the sector in relation to financial management and governance. We will continue to focus on these matters as a priority area in our forward work program.

While this report focuses on MidCoast Council, the findings should be considered by all councils to better understand the challenges and opportunities when addressing financial sustainability and financial management needs.

Findings and recommendations around the effectiveness of long-term financial planning, comprehensive and timely financial reporting and financial management governance arrangements are relevant for all councils.

What this report is about

The Local Government Act 1993 requires councils to apply sound financial management principles, including sustainable expenditure, effective financial management and regard to intergenerational equity.

This audit assessed whether MidCoast Council has effective financial management arrangements that support councillors and management to fulfill their responsibilities as financial stewards.

What we found

MidCoast Council has not met all legislative and policy requirements for long-term financial planning.

From FY2019–20 to FY2020–21, the Council had financial management and governance gaps. Some gaps were addressed throughout FY2021–22.

MidCoast Council experienced significant challenges in its implementation of a consolidated financial management system following amalgamation in 2016 and the merging of MidCoast Water in 2017. This led to gaps in finance processes and data quality.

What we recommended

The report recommends that MidCoast Council should:

• ensure its long-term financial plan meets legislative and policy requirements
• undertake service reviews to better understand net costs to inform budget and financial planning decisions
• improve the quality of asset management information to inform budget and financial planning decisions
• use the financial management components of the MC1 system to its full potential
• address control and process gaps identified in audits and reviews
• ensure competency of those responsible for finance and budget
• ensure financial sustainability initiatives account for the cost of services and asset management information.

Effective financial management is important in ensuring that councils achieve their long-term objectives, remain financially viable and deliver intended benefits to the community.

Sustainable financial management has been a priority for the local government sector since 2013 and continues to be one of the highest rated risks and priorities among councils in 2023.

According to data provided by the Department of Planning and Environment, during FY2020–21, NSW local councils:

• collected $7.8 billion in rates and annual charges
• received $5.8 billion in grants and contributions
• incurred $4.8 billion of employee benefits and on costs
• held $16.8 billion of cash and investments
• managed $175.2 billion in infrastructure, property plant and equipment
• entered into $3.7 billion of borrowings.

The Local Government Act 1993 (LG Act) requires local councils to apply sound financial management principles including responsible and sustainable expenditure, investment, and effective financial and asset management. Under the LG Act and the Local Government Regulation 2021 (LG Regulation) councils are required to:

• establish and monitor their budget position
• clearly establish approaches to raise revenue, including from rates and other sources
• develop and implement integrated planning to ensure financial sustainability in line with community priorities and needs
• regularly report on their financial performance through financial statements.

The objective of the audit is to assess whether MidCoast Council (the Council) has effective financial management arrangements that support councillors and management to fulfil their financial stewardship responsibilities. It considers whether:

• the Council has an effective governance framework for financial management, through the existence of governance, risk management, internal controls and provision of adequate financial management training, including whether:
  • governance, risk management and internal controls are in place for financial management
  • adequate financial management and governance training and support has been provided to councillors, management and operational managers.
• the Council has quality and comprehensive internal financial management reporting, including whether:
  • councillors and management have identified and implemented essential internal financial management reporting elements
  • council’s financial systems and data have integrity, and support identified financial management report production requirements
  • council reports are relevant, consistent, reliable, understandable, and tailored towards the requirements of key users (appendix two provides more information about the characteristics of effective financial management reporting).
• the financial management governance and reporting arrangements support councillors and management to fulfil their financial stewardship responsibilities, including whether councillors and management use internal financial management reporting to:
  • support budget decisions, resource allocation and cost setting (for example fees and charges)
  • monitor financial sustainability
  • assess operational efficiency, financial services and investments
  • make improvements where necessary.

This audit completed fieldwork during November 2022 to February 2023. The audit period of review was from 1 July 2019 to 30 June 2022.

Appendix one – Response from agency

Appendix two – Characteristics of effective financial management reporting

Appendix three – About the audit 

Appendix four – Performance auditing

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #381 - released 16 June 2023

This report is about

Results of the local government sector financial statement audits for the year ended 30 June 2022.

What we found

Unqualified audit opinions were issued for 83 councils, 11 joint organisations and nine county councils' financial statements.

The financial audits for two councils and two joint organisations are in progress due to accounting issues.

Fifty-seven councils and joint organisations (2021: 41) required extensions to submit their financial statements to the Office of Local Government (OLG), within the Department of Planning and Environment (the department).

The audit opinion on Kiama Municipal Council's 30 June 2021 financial statements was disclaimed due to deficient books and records.

Qualified audit opinions were issued on 43 councils' financial statements due to non-recognition of rural firefighting equipment vested under section 119 (2) of the Rural Fires Act 1997. Forty-seven councils appropriately recognised this equipment.

What we recommended

Consistent with the NSW Government's accounting position and the department's role of assessing councils' compliance with legislative responsibilities, standards or guidelines, the department should intervene where councils do not recognise vested rural firefighting equipment.

The key issues

There were 1,045 audit findings reported to councils in audit management letters, with 52% being unresolved from prior years.

What we recommended

Councils need to track progress of implementing audit recommendations, giving priority to high-risk and repeat issues.

Ninety-three high-risk matters were identified across the sector mainly relating to asset management, information technology, financial accounting and council governance procedures.

Asset valuations

Audit management letters reported 267 findings relating to asset management. Fifty-three councils had deficiencies in processes that ensure assets are fairly stated.

What we recommended

Councils need to complete timely asset valuations (repeat recommendation).

Integrity and completeness of asset source records

Fifty-two councils had weak processes over the integrity of fixed asset registers.

What we recommended

Councils need to improve controls that ensure integrity of asset records (repeat recommendation).

Cybersecurity

Our audits found that 47% of councils did not have a cyber security plan.

What we recommended

All councils need to prioritise creation of a cyber security plan to ensure data and assets are safeguarded.

Pursuant to the Local Government Act 1993 I am pleased to present my Auditor-General's report on Local Government 2022. My report provides the results of the 2021–22 financial audits of 126 councils, 11 joint organisations and nine county councils. The audits for two councils and two joint organisations are in progress due to significant accounting issues.

Unqualified audit opinions were issued for 83 councils, 11 joint organisations and nine county councils' 2021–22 financial statements. The statements for 43 councils were qualified due to non-recognition of rural firefighting equipment vested under section 119 (2) of the Rural Fires Act 1997. And the audit opinion on Kiama Municipal Council's 30 June 2021 financial statements was disclaimed due to deficiencies in books and records.

This year has again been challenging for many New South Wales local councils still recovering from the impact of emergency events and facing cost and resourcing pressures. We appreciate the efforts of council staff and management in meeting their financial reporting obligations. We share a mutual interest in raising the standard of financial management in this sector, and the importance of accurate and transparent reporting.

Disappointingly, accounting for the value of rural firefighting equipment vested in councils continued to be an unnecessary distraction and resulted in 43 councils having their financial statements qualified. We continue to recommend that the Office of Local Government should intervene where councils fail to comply with Australian Accounting Standards by not recognising assets vested to them under section 119(2) of the Rural Fires Act 1997.

Sound financial management is critical to councils' ability to instil trust and properly serve their communities. The recommendations in this report are intended to further improve their financial management and reporting capability, and encourage sound governance arrangements and cyber resilience. I am committed to continuing this work with councils in the 2022–23 year and beyond.

Margaret Crawford PSM

Auditor-General for New South Wales

Financial reporting is an important element of good governance. Confidence in and transparency of public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines audit observations related to the financial reporting audit results of councils and joint organisations.

A strong system of internal controls enables councils to operate effectively and efficiently, produce reliable financial reports, comply with laws and regulations, and support ethical government.

This chapter outlines the overall trends in governance and internal controls across councils and joint organisations in 2021–22.

Financial audits focus on key governance matters and internal controls supporting the preparation of councils’ financial statements. Breakdowns and weaknesses in internal controls increase the risk of fraud and error. Deficiencies in internal controls, matters of governance interest and unresolved issues are reported to management and those charged with governance through audit management letters. These letters include our observations, related implications, recommendations and risk ratings.

Total number of findings reported in audit management letters decreased

The following shows the overall findings of the 2021–22 audits reported in management letters compared with the previous year.

Appendix one – Response from the Office of Local Government within the Department of Planning and Environment

Appendix two – Status of audits

Appendix three – Councils received qualified audit opinions

Appendix four – Common reasons for council extensions

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

What this report is about

This report draws together the financial impact of natural disasters on agencies integral to the response and impact of natural disasters during 2021–22.

What we found

Over the 2021–22 financial year $1.4 billion from a budget of $1.9 billion was spent by the NSW Government in response to natural disasters.

Total expenses were less than the budget due to underspend in the following areas:

• clean-up assistance, including council grants
• anticipated temporary accommodation support
• payments relating to the Northern Rivers Business Support scheme for small businesses.

Natural disaster events damaged council assets such as roads, bridges, waste collection centres and other facilities used to provide essential services. Additional staff, contractors and experts were engaged to restore and repair damaged assets and minimise disruption to service delivery.

At 30 June 2022, the estimated damage to council infrastructure assets totalled $349 million.

Over the first half of the 2022–23 financial year, councils experienced further damage to infrastructure assets due to natural disasters. NSW Government spending on natural disasters continued with a further $1.1 billion spent over this period.

Thirty-six councils did not identify climate change or natural disaster as a strategic risk despite 22 of these having at least one natural disaster during 2021–22.

What the report is about

This audit assessed the effectiveness of the NSW Rural Fire Service (RFS) and local councils in planning and managing equipment for bushfire prevention, mitigation, and suppression.

What we found

The RFS has focused its fleet development activity on modernising and improving the safety of its firefighting fleet, and on the purchase of new firefighting aircraft.

There is limited evidence that the RFS has undertaken strategic fleet planning or assessment of the capability of the firefighting fleet to respond to current bushfire events or emerging fire risks.

The RFS does not have an overarching strategy to guide its planning, procurement, or distribution of the firefighting fleet.

The RFS does not have effective oversight of fleet maintenance activity across the State, and is not ensuring the accuracy of District Service Agreements with local councils, where maintenance responsibilities are described.

What we recommended

1. Develop a fleet enhancement framework and strategy that is informed by an assessment of current fleet capability, and research into appropriate technologies to respond to emerging fire risks.
2. Develop performance measures to assess the performance and capabilities of the fleet in each RFS District by recording and publicly reporting on fire response times, fire response outcomes, and completions of fire hazard reduction works.
3. Report annually on fleet allocations to RFS Districts, and identify the ways in which fleet resources align with district-level fire risks.
4. Develop a strategy to ensure that local brigade volunteers are adequate in numbers and appropriately trained to operate fleet appliances in RFS Districts where they are required.
5. Establish a fleet maintenance framework to ensure regular update of District Service Agreements with local councils.
6. Review and improve processes for timely recording of fleet asset movements, locations, and maintenance status.

This audit assessed how effectively the NSW Rural Fire Service (the RFS) plans and manages the firefighting equipment needed to prevent, mitigate, and suppress bushfires. This audit also examined the role of local councils in managing bushfire equipment fleet assets. Local councils have vested legal ownership of the majority of the land-based firefighting fleet, including a range of legislated responsibilities to carry out fleet maintenance and repairs. The RFS has responsibilities to plan and purchase firefighting fleet assets, and ensure they are ready for use in response to fires and other emergencies.

This report describes the challenges in planning and managing the firefighting fleet, including a confusion of roles and responsibilities between the RFS and local councils in relation to managing certain land-based rural firefighting fleet – a point that has been made in our Local Government financial audits over several years. This role confusion is further demonstrated in the responses of the RFS and local councils to this audit report – included at Appendix one.

The lack of cohesion in roles and responsibilities for managing rural firefighting vehicles increases the risk that these firefighting assets are not properly maintained and managed, and introduces a risk that this could affect their readiness to be mobilised when needed.

While the audit findings and recommendations address some of the operational and organisational inefficiencies in relation to rural firefighting equipment management, they do not question the legislative arrangements that govern them. This is a matter for the NSW Government to consider in ensuring the fleet arrangements are fit for purpose, and are clearly understood by the relevant agencies.

The NSW Rural Fire Service (hereafter the RFS) is the lead combat agency for bushfires in New South Wales, and has the power to take charge of bushfire prevention and response operations anywhere in the State. The RFS has responsibilities to prevent, mitigate and suppress bushfires across 95% of the State, predominantly in the non-metropolitan areas of New South Wales. Fire and Rescue NSW is responsible for fire response activity in the cities and large townships that make up the remaining five per cent of the State.

The RFS bushfire fleet is an integral part of the agency's overall bushfire risk management. The RFS also uses this fleet to respond to other emergencies such as floods and storms, motor vehicle accidents, and structural fires. Fleet planning and management is one of a number of activities that is necessary for fire mitigation and suppression.

The Rural Fires Act 1997 (Rural Fires Act) imposes obligations on all landowners and land managers to prevent the occurrence of bushfires and reduce the risk of bushfires from spreading. Local councils have fire prevention responsibilities within their local government areas, principally to reduce fire hazards near council owned or managed assets, and minor roads.

The RFS is led by a Commissioner and is comprised of both paid employees and volunteer rural firefighters. Its functions are prescribed in the Rural Fires Act and related legislation such as the State Emergency Rescue Management Act 1989. The RFS functions are also described in Bush Fire Risk Management Plans, the State Emergency Management Plan, District Service Agreements, and RFS procedural documents. Some of the core responsibilities of the RFS include:

• preventing, mitigating, and suppressing fires across New South Wales
• recruiting and managing volunteer firefighters in rural fire brigades
• purchasing and allocating firefighting fleet assets to local councils
• establishing District Service Agreements with local councils to give the RFS permissions to use the fleet assets that are vested with local councils
• carrying out fleet maintenance and repairs when authorised to do so by local councils
• inspecting the firefighting fleet
• supporting land managers and private property owners with fire prevention activity.

In order to carry out its legislated firefighting functions, the RFS relies on land-based vehicles, marine craft, and aircraft. These different firefighting appliance types are referred to in this report as the firefighting fleet or fleet assets.

RFS records show that in 2021 there were 6,345 firefighting fleet assets across NSW. Most of the land-based appliances commonly associated with firefighting, such as water pumpers and water tankers, are purchased by the RFS and vested with local councils under the Rural Fires Act. The vesting of firefighting assets with local councils means that the assets are legally owned by the council for which the asset has been purchased. The RFS is able to use the firefighting assets through District Service Agreements with local councils or groups of councils.

In addition to the land-based firefighting fleet, the RFS owns a fleet of aircraft with capabilities for fire mitigation, suppression, and reconnaissance during fire events. The RFS hires a fleet of different appliances to assist with fire prevention and hazard reduction works. These include aircraft for firefighting and fire reconnaissance, and heavy plant equipment such as graders and bulldozers for hazard reduction. Hazard reduction works include the clearance of bush and grasslands around major roads and protected assets, and the creation and maintenance of fire trails and fire corridors to assist with fire response activity.

The RFS is organised into 44 RFS Districts and seven Area Commands. The RFS relies on volunteer firefighters to assist in carrying out most of its firefighting functions. These functions may include the operation of the fleet during fire response activities and training exercises, and the routine inspection of the fleet to ensure it is maintained according to fleet service standards. Volunteer fleet inspections are supervised by the RFS Fire Control Officer.

In 2021 there were approximately 73,000 volunteers located in 1,993 rural fire brigades across the State, making the RFS the largest volunteer fire emergency service in Australia. In addition to brigade volunteers, the RFS has approximately 1,100 salaried staff who occupy leadership and administrative roles at RFS headquarters and in the 44 RFS Districts.

Local councils have legislative responsibilities relating to bushfire planning and management. Some of the core responsibilities of local councils include:

• establishing and equipping rural fire brigades
• contributing to the Rural Fire Fighting Fund
• vested ownership of land-based rural firefighting equipment
• carrying out firefighting fleet maintenance and repairs
• conducting bushfire prevention and hazard reduction activity.

The objective of this audit was to assess the effectiveness of the RFS and local councils in planning and managing equipment for bushfire prevention, mitigation, and suppression. From the period of 2017 to 2022 inclusive, we addressed the audit objective by examining whether the NSW RFS and local councils effectively:

• plan for current and future bushfire fleet requirements
• manage and maintain the fleet required to prevent, mitigate, and suppress bushfires in NSW.

This audit did not assess:

• the operational effectiveness of the RFS bushfire response
• the effectiveness of personal protective equipment and clothing
• the process of vesting of rural firefighting equipment with local councils
• activities of any other statutory authorities responsible for managing bushfires in NSW.

As the lead combat agency for the bushfire response in NSW, the RFS has primary responsibility for bushfire prevention, mitigation, and suppression.

Three local councils were selected as case studies for this audit, Hawkesbury City Council, Wagga Wagga City Council and Uralla Shire Council. These case studies highlight the ways in which the RFS and local councils collaborate and communicate in rural fire districts.

The RFS has not made significant changes to the size or composition of the firefighting fleet in the past five years and does not have an overarching strategy to drive fleet development

Since 2017, the RFS has made minimal changes to its firefighting fleet volumes or vehicle types. The RFS is taking a fleet renewal approach to fleet planning, with a focus on refurbishing and replacing ageing firefighting assets with newer appliances and vehicles of the same classification and type. While the RFS has adopted a fleet renewal approach, driven by its Appliance Replacement Program Guide, it does not have a strategy or framework to guide its future-focused fleet development. There is no document that identifies and analyses bushfire events and risks in NSW, and matches fleet resources and fleet technologies to meet those risks. The RFS does not have fleet performance measures or targets to assess whether the size and composition of the fleet is meeting current or emerging bushfire climate hazards, or fuel load risks across its 44 NSW Fire Districts.

The RFS fleet currently comprises approximately 4,000 frontline, operational firefighting assets such as tankers, pumpers, and air and marine craft, and approximately 2,300 logistical vehicles, such as personnel transport vehicles and specialist support vehicles. Of the land-based firefighting vehicles, the RFS has maintained a steady number of approximately 3,800 tankers and 65 pumpers, year on year, for the past five years. This appliance type is an essential component of the RFS land-based, firefighting fleet with capabilities to suppress and extinguish fires.

Since 2017, most RFS fleet enhancement activity has been directed to upgrades and the modernisation of older fleet assets with new safety features. There is limited evidence of research into new fleet technologies for modern firefighting. The RFS fleet volumes and fleet types have remained relatively static since 2017, with the exception of the aerial firefighting fleet. Since 2017, the RFS has planned for, and purchased, six additional aircraft to add to the existing three aircraft in its permanent fleet.

While the RFS has made minimal changes to its fleet since 2017, in 2016 it reduced the overall number of smaller transport vehicles, by purchasing larger vehicles with increased capacity for personnel transport. The consolidation of logistical and transport vehicles accounts for an attrition in fleet numbers from 7,058 in 2016, to 6,315 in 2017 as shown in Exhibit 2.

The firefighting fleet management system is not always updated in a timely manner due to insufficient RFS personnel with permissions to make changes in the system

The RFS uses a fleet management system known as SAP EAM to record the location and status of firefighting fleet assets. The system holds information about the condition of the firefighting fleet, the home location of each fleet asset, and the maintenance, servicing, and inspection records of all assets. The RFS uses the system for almost all functions related to the firefighting fleet, including the location of vehicles so that they can be dispatched during operational exercises or fire responses.

Staff at RFS Headquarters are responsible for creating and maintaining asset records in the fleet management system. RFS District staff have limited permissions in relation to SAP EAM. They are able to raise work orders for repairs and maintenance, upload evidence to show that work has been done, and close actions in the system.

RFS District staff are not able to enter or update some fleet information in the system, such as the location of vehicles. When an RFS District receives a fleet appliance, it cannot be allocated to a brigade until the location of the asset is accurately recorded in the system. The location of the asset must be updated in the SAP EAM system by staff at RFS Headquarters. District staff can request system support from staff at RFS Headquarters to enter this information. At the time of writing, the position responsible for updating the fleet management system at RFS Headquarters was vacant, and RFS District personnel reported significant wait times in response to their service requests.

The RFS conducts annual audits of SAP EAM system information to ensure data is accurate and complete. RFS staff are currently doing data cleansing work to ensure that fleet allocations are recorded correctly in the system.

Communication between brigades, local councils and the RFS needs improvement to ensure that fleet information is promptly updated in the fleet management system

RFS brigade volunteers do not have access to the fleet management system. When fleet assets are used or moved, volunteers report information about the location and condition of the fleet to RFS District staff using a paper-based form, or by email or phone. Information such as vehicle mileage, engine hours, and defects are all captured by volunteers in a logbook which is scanned and sent to RFS District staff. RFS District staff then enter the relevant information into the fleet management system, or raise a service ticket with RFS Headquarters to enter the information.

Brigade volunteers move fleet assets for a range of reasons, including for fire practice exercises. If volunteers are unable to report the movement of assets to RFS District staff in a timely manner, this can lead to system inaccuracies. Lapses and backlogs in record keeping can occur when RFS staff at district offices or at Headquarters are not available to update records at the times that volunteers report information. A lack of accurate record keeping can potentially impact on RFS operational activities, including fire response activity.

Brigade volunteers notify RFS District staff when fleet appliances are defective, or if they have not been repaired properly. District staff then enter the information into the fleet management system. The inability of volunteers to enter information into the system means they have no visibility over their requests, including whether they have been approved, actioned, or rejected.

Local councils are responsible for servicing and maintaining the firefighting fleet according to the Rural Fires Act, but this responsibility can be transferred to the RFS through arrangements described in local service agreements. Council staff record all fleet servicing and maintenance information in their local systems. The types of fleet information that is captured in local council records can vary between councils. RFS staff described the level of council reporting, and the effectiveness of this process, as 'mixed'.

Councils use different databases and systems to record fleet assets, and some councils are better resourced for this activity than others

Firefighting fleet information is recorded in different asset management systems across NSW. Each council uses its own asset management system to record details about the vested fleet assets. All three councils that were interviewed for this audit had different systems to record information about the fleet. In addition, the type of information captured by the three councils was varied.

Local councils have varying levels of resources and capabilities to manage the administrative tasks associated with the firefighting fleet. Some of the factors that impact on the ability of councils to manage administrative tasks include: the size of the council; the capabilities of the information management systems, the size of the staff team, and the levels of staff training in asset management.

Uralla Shire Council is a small rural council in northern NSW. This council uses financial software to record information about the firefighting fleet. While staff record information about the condition of the asset, its replacement value, and its depreciation, staff do not record the age of the asset, or its location. Staff manually enter fleet maintenance information into their systems. Uralla Shire Council would like to purchase asset maintenance software that generates work orders for fleet repairs and maintenance. However, the council does not have trained staff in the use of asset management software, and the small size of the fleet may not make it financially worthwhile.

The Hawkesbury City Council uses a single system to capture financial and asset information associated with the firefighting fleet. Hawkesbury is a large metropolitan council located north-west of Sydney, with a relatively large staff team in comparison with Uralla Shire Council. The Hawkesbury City Council has given RFS District staff access to their fleet information system. RFS District staff can directly raise work orders for fleet repairs and maintenance through the council system, and receive automated notifications when the work is complete.

Two of the three audited councils report that they conduct annual reviews of fleet assets to assess whether the information they hold is accurate and up-to-date.

More than half of the fleet maintenance service agreements between the RFS and local councils have not been reviewed in ten years, and some do not reflect local practices

Local councils have a legislated responsibility to service, repair, and maintain the firefighting fleet to service standards set by the RFS. Councils may transfer this responsibility to the RFS through District Service Agreements. The RFS Districts are responsible for ensuring that the service agreements are current and effective.

The RFS does not have monitoring and quality control processes to ensure that service agreements with local councils are reviewed regularly. The RFS has 73 service agreements with local councils or groups of councils. Sixty-three per cent of service agreements had not been reviewed in the last ten years. Only four service agreements specify an end date and, of those, one agreement expired in 2010 and had not been reviewed at the time of this audit.

The RFS does not have a framework to ensure that service agreements with local councils reflect actual practices. Of the three councils selected for audit, one agreement does not describe the actual arrangements for fleet maintenance practices in RFS Districts. The service agreement with Hawkesbury City Council specifies that the RFS will maintain the firefighting fleet on behalf of council when, in fact, council maintains the firefighting fleet. The current agreement commenced in 2012, and at the time of writing had not been updated to reflect local maintenance practices.

When District Service Agreements are not reviewed periodically, there is a risk that neither local councils nor the RFS have clear oversight of the status of fleet servicing, maintenance, and repairs.

RFS District Service Agreements set out a requirement that RFS and local councils establish a liaison committee. Liaison committees typically include council staff, RFS District staff, and RFS brigade volunteers. While service agreements state that liaison committees must meet periodically to monitor and review the performance of the service agreement, committee members determine when and how often the committee meets.

RFS District staff and staff at the three audited councils are not meeting routinely to review or update their service agreements. At Wagga Wagga City Council, staff meet with RFS District staff each year to report on activity to fulfil service agreement requirements. Uralla Shire Council staff did not meet routinely with RFS District staff before 2021. When liaison committees do not meet regularly, there is a risk that the RFS and local councils have incorrect or outdated information about the location, status, or condition of the firefighting fleet. Given that councils lack systems to track and monitor fleet locations, regular communication between the RFS and local councils is essential.

The RFS has not established processes to ensure that local councils and RFS District personnel meet and exchange information about the fleet. Of the three councils selected for this audit, one council had not received information about the number, type, or status of the fleet for at least five years, and did not receive an updated list of appliances until there was a change in RFS District personnel. This has impacted on the accuracy of council record keeping. Councils do not always receive notification about new assets or information about the location of assets from the RFS, and therefore cannot reflect this information in their accounting and reporting.

RFS area commands audit system records to ensure fleet inspections occur as planned, but central systems are not always updated, creating operational risks

RFS District staff are required by the Rural Fires Act to ensure the firefighting fleet is inspected at least once a year. Regular inspections of the fleet are vital to ensure that vehicles are fit-for-purpose and safe for brigade volunteers. Inspections are also fundamental to the operational readiness and capability of RFS to respond to fire incidents.

RFS Area Command personnel conduct audits of fleet maintenance data to ensure that fleet inspections are occurring as planned. These inspections provide the RFS with assurance that the fleet is being maintained and serviced by local council workshops, or third-party maintenance contractors.

Some RFS Districts run their own fleet management systems outside of the central management system. They do this to manage their fleet inspection activity effectively. Annual fleet inspection dates are programmed by staff at RFS Headquarters. Most of the inspection dates generated by RFS Headquarters are clustered together and RFS Districts need to separate inspection times to manage workloads over the year. Spreading inspection dates is necessary to avoid exceeding the capacity of local council workshops or third party contractors, and to ensure that fleet are available during the bushfire season.

The fleet inspection records at RFS Headquarters are not always updated in a timely manner to reflect actual inspection and service dates of vehicles. District staff are not able to change fleet inspection and service dates in the central management system because they do not have the necessary permissions to access the system. The usual practice is for RFS District staff to notify staff at RFS Headquarters, and ask them to retrospectively update the system. As there is a lag in updating the central database, at a point in time, the actual inspection and service dates of vehicles can be different to the dates entered in the central fleet management system.

Fleet inspection and maintenance records must be accurately recorded in the central RFS management system for operational reasons. RFS Headquarters personnel need to know the location and maintenance status of fleet vehicles at all times in order to dispatch vehicles to incidents and fires. The RFS fleet management system is integrated with a new Computer Aided Dispatch System. The Computer Aided Dispatch System assigns the nearest and most appropriate vehicles to fire incidents. The system relies on accurate fleet locations and fleet condition information in order to dispatch these vehicles.

There is a risk that RFS Headquarters' systems do not contain accurate information about the location and status of vehicles. Some may be in workshops for servicing and repair, while the system may record them as available for dispatch. As there are many thousands of fleet vehicles, all requiring an annual service and inspection, a lack of accurate record keeping has wide implications for State fire operations.

RFS is currently exploring ways to improve the ways in which fleet inspections are programmed into the fleet management system.

RFS provides funds to councils to assist with maintaining the firefighting fleet, but does not receive fleet maintenance cost information from all local councils

Each year the RFS provides local councils with a lump sum to assist with the cost of repairing and maintaining the firefighting fleet. This lump sum funding is also used for meeting the costs of maintaining brigade stations, utilities, and other miscellaneous matters associated with RFS business.

In 2020–21, the RFS provided NSW local councils with approximately $23 million for maintenance and repairs of appliances, buildings, and utilities. Ninety councils were provided with lump sum funding in 2021, receiving on average $257,000. The amounts received by individual councils ranged from $56,200 to $1,029,884.

Some councils provide itemised repairs and maintenance reports to RFS District staff, showing the work completed and the cost of that work. However, not all councils collect this information or provide it to the RFS. Local councils collect fleet maintenance information in their local council systems. In some cases, the responsibility for fleet maintenance is shared across a group of councils, and not all councils have oversight of this process.

The RFS has not taken steps to require local councils to provide itemised maintenance costings for the firefighting fleet. Thus, the RFS does not have a clear understanding of how local councils are spending their annual fleet maintenance funding allocations. The RFS does not know if the funding allocations are keeping pace with the actual cost of repairing and maintaining the fleet.

RFS District staff report that funding shortfalls are impacting on the prioritisation of fleet servicing and maintenance works in some council areas. When fleet servicing and maintenance is not completed routinely or effectively, there is a risk that it can negatively impact the overall condition and lifespan of the vehicle. Poor processes in relation to fleet maintenance and repair risk impacting on the operational capabilities of the fleet during fire events.

The timeliness and effectiveness of fleet servicing and maintenance is affected by resource levels in RFS Districts and local councils

Local councils have a legislated responsibility to service and maintain the firefighting fleet to the service standards set by the RFS. Fleet maintenance is usually done by the entity with the appropriate workshops and resources, and the maintenance arrangements are described in District Service Agreements. RFS District staff conduct annual inspections to ensure that the firefighting fleet has been serviced and maintained appropriately, and is safe for use by brigade volunteers. If the fleet has not been maintained to RFS service standards or timelines, RFS District staff may work with local councils to support or remediate these works.

The effectiveness of this quality control activity is dependent on relationships and communication between the RFS Districts and local councils. While some RFS staff reported having positive relationships with local councils, others said they struggled to get fleet maintenance work done in a timely manner. Some councils reported that funding shortfalls for fleet maintenance activity was impacting on the prioritisation of RFS fleet maintenance works. When fleet maintenance work is not completed routinely or effectively, it can negatively impact on the overall condition and lifespan of the vehicle. It can also reduce the capacity of the RFS to respond to fire events.

Fleet quality control activities are carried out by RFS District staff. In some of the smaller RFS Districts, one person is responsible for liaising with local councils and brigade volunteers about fleet maintenance and repairs. In the regions where resources are limited, there is less ability to maintain ongoing communication. This is impacting on fleet service and maintenance timelines and the timeliness of fleet monitoring activity.

The RFS has mutual support arrangements with agencies in NSW and interstate, though shared fleet levels are yet to be quantified

The RFS has arrangements with state, federal, and international fire authorities to provide mutual support during fire incidents. In NSW, the RFS has agreements with the three statutory authorities – Fire and Rescue NSW, the Forestry Corporation of NSW, and the NSW National Parks and Wildlife Service. The agreement with Fire and Rescue NSW provides a framework for cooperation and joint operations between the agencies. The agreements with the Forestry Corporation of NSW and the NSW National Parks and Wildlife Service describe the control and coordination arrangements for bush and grass fires across NSW. These arrangements are set out in legislation and incorporated into local Bush Fire Risk Management Plans.

The RFS has agreements with fire authorities in three of the four Australian states and territories that share a border with NSW – the Australian Capital Territory, Queensland, and South Australia. Each agreement sets out the arrangements for mutual assistance and joint operations, including arrangements for sharing aircraft. The agreement between the RFS and Victoria had lapsed. The RFS told the NSW Bushfire Inquiry that the agreement with Victoria would be finalised by June 2020. In June 2022, the RFS reported that the agreement was in the process of being finalised.

The arrangements for mutual aid from Western Australia, Northern Territory and Tasmania, are managed by the National Resource Sharing Centre. These agreements set out the arrangements for interstate assistance between Australian fire services, emergency services, and land management agencies in those states and territories.

These mutual support arrangements may assist during state-based fire events. However, when there are competing demands for resources, such as during the bushfires of 2019–2020, there can be limits on fleet availability. During the 2019–2020 fires, resources were stretched in all jurisdictions as these fires affected NSW, Victoria, and Queensland.

There are opportunities for the RFS and other NSW agencies to quantify fleet resources across the State and identify assets that can be mobilised for different fire activities. This form of fleet planning may be used to enhance surge capabilities during times of high fire activity. There are also opportunities for the RFS and other agencies to match the levels of shared assets to projected bushfire risks.

Appendix one – Responses from agencies 

Appendix two – About the audit 

Appendix three – Performance auditing

Copyright notice

© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.

Parliamentary reference - Report number #376 - released 27 February 2023